Annual Report 2016 - listed companysabana.listedcompany.com/misc/ar2016/ar2016.pdf ·...

Annual Report 2016

CONTENTS02 Letter to Unitholders05 Corporate Profile06 Core Values07 Vision and Mission08 Our Strategy 09 Our Trust Structure10 Shari’ah Compliance Commonly Asked Questions12 2016 Significant Events14 Financial Highlights16 Financial Review18 Investor Relations20 Unit Performance23 Independent Market Study 43 Property Portfolio 55 Operations Review 62 Board of Directors 67 Management Team 69 Corporate Social Responsibility71 Corporate Governance Report93 Financial Contents168 Additional Information169 Statistics of Unitholdings172 Notice of Annual General Meeting Proxy Form

World’sLARGEST

Listed Shari’ah Compliant Industrial REIT by Total Assets

As at 31 December 2016

Dear Unitholders

We are pleased to present to you the Annual Report for Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (“Sabana REIT” or the “Trust”) for the financial year ended 31 December 2016 (“FY 2016”).

It was another challenging year, marked by severe economic and cyclical headwinds. The lacklustre global economy and slowdown in global trade weighed on Singapore’s trade-dependent economy. Consequently, the Singapore economy grew 1.8 per cent in 2016, the slowest annual growth rate since 2009. The slowdown affected business sentiments and dampened demand for industrial space.

REMAINING FOCUSED AMIDST ADVERSITIESAs a REIT with a focus on industrial real estate, Sabana REIT was adversely affected by the economic uncertainties and the resulting slowdown in the industrial and warehouse market.

However, amidst a challenging business environment in FY 2016, Sabana REIT generated a gross revenue of S$91.8 million, a decline of 8.9% compared to S$100.8 million in FY 2015. The fall in revenue was partly attributed to negative rental reversions for certain master leases renewals, lower portfolio occupancy arising from conversion of three master leases1 which expired in FY 2015 to multi-tenanted leases, and lower contribution from divestment of properties.

Net property income (“NPI”) decreased 20.5% to S$56.9 million, partly due to higher property expenses resulting from the conversion of the three master leases into multi-tenanted lease arrangements as well as higher property tax and land rent expenses associated with the conversion of certain master leases into non-triple net master lease arrangements in FY 2015.

The Trust was able to generate distributable income of S$36.9 million for FY 2016, 26.3% lower than FY 2015, in tandem with the lower NPI. Total distribution per unit (“DPU”) for the financial year was 4.642,3 cents. Outstanding borrowings stood at S$441.1 million as at 31 December 2016 compared to S$485.8 million in the previous corresponding period.

INVESTING FOR GROWTHWe adopt a long-term perspective to growing our business and creating value that is sustainable in the long run. Even as we implement measures to contain costs and improve operations efficiency to address short-term challenges, we continue to explore and evaluate acquisition opportunities that can increase the quality of our portfolio and deliver long-term value. We also review our portfolio regularly and where appropriate divest non-core and underperforming assets to recycle capital for investments in quality assets while bearing in mind the interests of the Unitholders.

Letter to Unitholders

Left:Mr Kevin XayarajCo-founder, CEO and Executive Director

Right:Mr Steven Lim Kok HoongChairman and Independent Non-executive Director

1 23 Serangoon North Avenue 5, 15 Jalan Kilang Barat and 34 Penjuru Lane.2 Includes the 310,712,244 new units issued on 25 January 2017 (“Rights Units”) at an issue price of S$0.258 per unit pursuant to

the 42-for-100 rights issue to raise gross proceeds of approximately S$80.2 million (“Rights Issue”).3 Excluding the effects of the Rights Issue, DPU would have been 5.01 cents.

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SABANA REITAnnual Report 2016

Road, 33 & 35 Penjuru Lane and 18 Gul Drive at the same rental rates.

THE STATE OF OUR PORTFOLIOAs at 31 December 2016, Sabana REIT has a diversified portfolio of 21 properties, comprising 10 master-tenanted properties and 10 multi-tenanted properties. For the remaining property (218 Pandan Loop), the divestment is expected to be completed by 2Q FY 20175. The Trust’s overall portfolio occupancy was 87.2%.

STRENGTHENING OUR FINANCIAL STRUCTUREOn 25 August 2016, the Manager of Sabana REIT successfully secured new Commodity Murabaha Facilities of up to S$108.0 million, comprising a 3.5-year term Commodity Murabaha facility of up to S$90.0 million and a 3.5-year revolving Commodity Murabaha facility of up to S$18.0 million. The facilities were used to re-finance expiring facilities under the existing Master Murabaha Agreement as well as for working capital.

On 20 December 2016, the Manager undertook an underwritten and renounceable rights issue of 310,712,244 new units in Sabana REIT. The Rights Units were offered on the basis of 42 Rights Units for every 100 existing units in Sabana REIT held as at 29 December 2016. At the successful completion of the exercise, the Rights Issue raised gross proceeds amounting to approximately S$80.2 million. The proceeds from the Rights Issue, net of issue-related expenses, had been fully utilised as at date of this report, partly to repay short-term borrowings and partly placed as short-term bank deposits, pending their deployment for the proposed acquisitions.

UNCERTAIN OUTLOOK FOR 2017The outlook for FY 2017 is uncertain. The global economy will continue to be challenged by uncertainties and volatility. The trend toward protectionism will weigh on global trade flows, affecting Singapore’s economy.

In this respect, the Trust has proposed acquiring three industrial assets4 in the financial year under review. These acquisitions were in line with the Trust’s strategy to acquire income-producing industrial real estate assets which provide cash flows and stable returns to Unitholders.

DIVESTING NON-CORE ASSETSIn last year’s annual report, we informed you about the completion of the divestment of 3 Kallang Way 2A and 200 Pandan Loop in 1Q 2016.

Net proceeds of approximately S$53.0 million were used mainly to repay outstanding short-term borrowings. We would also like to inform that we have entered into a conditional sale and purchase agreement on 5 December 2016 for the divestment of a single-storey cold room warehouse with mezzanine floor and a two-storey office building at 218 Pandan Loop for a sale consideration of S$14.8 million. The property which was acquired on 26 November 2010 for S$13.5 million as part of the IPO portfolio has a gross floor area (“GFA”) of approximately 50,374 square feet representing about 1.1% of the Trust’s total portfolio GFA. When the divestment is completed, the proceeds may be used to repay outstanding borrowings, to pursue acquisition opportunities or for working capital purposes. The divestment is in line with the Trust’s strategy to divest non-core and under-performing assets to recycle Sabana REIT’s capital into higher yielding assets and optimise returns for Unitholders.

PROACTIVE PORTFOLIO MANAGEMENTNotwithstanding the challenging market conditions, we continued to maintain rigorous marketing and leasing efforts with the objective of increasing the Trust’s portfolio occupancy. We also continued to proactively engage our master tenants and sub-tenants to more effectively manage lease expiries and strive to fill every available space.

On 17 November 2016, we have successfully renewed for one year the master leases in respect of three Sponsor-related properties, 51 Penjuru


4 72 Eunos Avenue 7, 107 Eunos Avenue 3 and 47 Changi South Avenue 2.5 Pending JTC approval.

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to create and deliver value to Unitholders over the long term.

We will remain disciplined and focused in executing our growth strategies, avoiding the distractions of cyclical challenges and volatility in the equity market. Given that a portfolio of quality assets is the keystone of our business, we will continue to invest in strengthening our portfolio with prudent financial and cost management. We have in place an experienced, dedicated and committed team of professionals to maximise occupancy and enhance the value of our portfolio. As such, we are confident that we can ride the current slowdown in the industry and continue on the path to sustainable growth.

ACKNOWLEDGEMENTSOn behalf of the Board of Directors, we would like to thank our Unitholders for their patience and understanding during this difficult year.

On 27 February 2017, the Manager announced the resignation of our Non-Executive Director Ms Ng Shin Ein. We would like to take this opportunity to thank Ms Ng for her invaluable contributions during her tenure. The Board is also in the midst of searching for a suitable candidate as an Independent Director to join the Board in compliance with the enhanced regulatory requirements implemented by the Monetary Authority of Singapore. We continue to hold our Unitholders in high regard and value their feedback. We are also committed to constructively engaging Unitholders in a compliant and transparent manner.

We appreciate the assistance and cooperation of our Trustee, partners, lenders and tenants as we negotiate the varied challenges that confronted us.

Last but not least, we would like to thank our fellow Directors, the Management and staff for their hard work and dedication.

Mr Steven Lim Kok HoongChairman and Independent Non-executive Director

Mr Kevin XayarajCo-founder, CEO and Executive Director

Businesses in Singapore will continue to face sluggish demand, high business costs and stiff competition. Singapore dollar interest rates are expected to face upward pressure in 2017 in tandem with the anticipated rise in US interest rates, raising the cost of funds for businesses. In the National Business Survey by the Singapore Business Federation, nearly half of the companies surveyed expect the economic climate to worsen in 2017 citing costs and manpower concerns.

The outlook for industrial real estate in 2017 remains subdued. The operating environment is expected to be competitive, caused by a surge in supply completions compounded by a weak demand for industrial space on the back of uncertain business conditions.

A Strategic Review Committee has been set up to review the current shareholding structure and management of the Manager, as well as Sabana REIT’s strategic direction and business. The Sponsor and the Manager are considering all options to further the sustainable growth of Sabana REIT and the interest of its unitholders.

FOCUS ON LONG-TERM SUSTAINABLE GROWTHWe recognise that Sabana REIT is facing the most severe challenge to its business since its listing. Some challenges are cyclical and will eventually pass. Certain concerns such as costs and manpower should and have been addressed by the government and the benefits of the relevant policies will take time to filter down to the Trust. Certain international events beyond our control will cause disruptions which we will monitor vigilantly and respond with appropriate measures to address the impact.

The challenges that the Trust is facing currently are multi-faceted and in many aspects, inter-related. As such, we cannot address them effectively with piecemeal solutions. We will adopt a holistic approach in managing these challenges, including reinforcing our fundamentals, improving operational efficiency, strengthening our capital structure and enhancing marketing and tenants engagement efforts. Our overarching objective is

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Corporate Profile

ABOUT SABANA REIT

Sabana REIT’s property portfolio, valued at approximately S$1.0 billion as at 31 December 2016, comprises 21 properties strategically located across Singapore. Sabana REIT has four main industrial property segments: High-tech Industrial, Chemical Warehouse and Logistics, Warehouse and Logistics and General Industrial. As at 31 December 2016, Sabana REIT continued to be the largest listed Shari’ah compliant industrial REIT in the world in terms of total asset size.

The Trust is managed by an external manager, Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”).

THE MANAGERThe Manager was incorporated in Singapore on 15 March 2010 and is wholly-owned by Sabana Investment Partners Pte. Ltd. (“SIP”), of which the shareholders are Vibrant Group Limited (the “Sponsor”), Blackwood Investment Pte. Ltd. (“Blackwood”) and Atrium Asia Capital Partners Pte. Ltd. (“AACP”).

WE WORK FOR UNITHOLDERS

Our objective is to provide Unitholders with regular and stable distributions. We also aim to achieve long-term growth in DPU and net asset value (“NAV”) per unit in Sabana REIT (“Unit”),

while maintaining an appropriate capital structure for Sabana REIT.

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SABANA REITAT A GLANCE

We are guided by our core values. They define our culture and shape our personality and decision-making process.

CORE VALUES

FAIRNESS AND EQUALITY

We ensure that our business activities are consistent with

the principles of fairness, partnerships and

equality.

INTEGRITYWe are committed

to the values of responsibility,

transparency and professionalism.

PEOPLE We recognise that our

people are our greatest assets. By creating and maintaining

a conducive working environment, our people will grow professionally

and make a positive impact to both the

organisation and society.

FOCUS ON VALUE CREATION We promise to create value for Unitholders by creating

success factors and direction for the future.

UNITHOLDERS’ INTERESTS FIRST

We strive to build a portfolio of quality assets for our

Unitholders.

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VISIONTo be a prominent Shari’ah compliant industrial real estate investment trust

(“REIT”) with an outstanding portfolio of assets in Singapore and beyond.

MISSIONTo seek yield-accretive initiatives to strengthen and grow Sabana REIT’s

portfolio and to satisfy our Unitholders by delivering attractive DPU.

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OUR STRATEGY

SABANA REIT

OPPORTUNISTIC DEVELOPMENT Within the limits of Appendix 6 of the Code on Collective Investment Schemes (“Property Funds Appendix”) issued by the Monetary Authority of Singapore (“MAS”), we will prudently undertake development activities when appropriate opportunities arise, while mitigating construction and leasing risks and any short-term yield dilution resulting from additional capital raised for the purpose of the development activities.

GROWTH THROUGH ACQUISITIONS We aim to expand Sabana REIT’s portfolio by acquiring quality properties across the High-tech Industrial, Chemical Warehouse and Logistics, Warehouse and Logistics and General Industrial property segments, both in Singapore and overseas. Our goal is to achieve greater diversity in terms of portfolio allocation across property segments, as well as in geographical locations. The availability of amenities and major transport routes, as well as the quality of building specifications remain key considerations in our acquisition process.

CAPITAL AND RISK MANAGEMENT

We employ an appropriate mix of debt and equity in financing acquisitions. We will also continue to be proactive in expanding our base of relationship

with banks, in order to access a greater pool of financing options to optimise risk-adjusted

returns to Unitholders.

PROACTIVE ASSET MANAGEMENT

We proactively source for new tenants while managing lease renewals to minimise

downtime and maximise rental yields. We strive to maintain a balanced mix of tenant

trade sectors and well-distributed lease expiry profile to achieve greater portfolio

resilience and stability.

Our Trust Structure

1 The Manager is 100.0% owned by SIP. SIP is 51.0% owned by the Sponsor, 45.0% owned by Blackwood and 4.0% owned by AACP as at 31 December 2016.

2 The Property Manager, Sabana Property Management Pte. Ltd. (“SPM”) is 100.0% owned by SIP, indirectly through the Manager.

TRUSTEEMANAGER1

SABANA SUKUK

PTE. LTD.

INDEPENDENT SHARI’AH

COMMITTEEUNITHOLDERS

SABANA TREASURYPTE. LTD.

PROPERTYMANAGER2

THE PROPERTIES

Ownership of assets

Net property income

Advises the Manager on Shari’ah compliance matters and issues the Shari’ah Certification

Property management

services

Property management

fees

A wholly-owned subsidiary for

the provision of treasury services

Trustee fee

Acts on behalf of Unitholders

Management services

Management fees

Ownership of Units

Distributions

100.0%ownership

SABANA REIT

100.0%ownership

100.0%ownership

A wholly-owned subsidiary for

the provision of treasury services

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Q: What does being “Shari’ah compliant” mean?

A: Being Shari’ah compliant means complying with Shari’ah investment principles and procedures which are consistent with principles of Islamic law. It also requires general considerations of ethical investing in terms of social responsibility in asset selection and structuring.

Q: What are the differences in the day-to-day operations of Sabana REIT compared to conventional REITs?

A: We have to ensure that the total rental income from lessees, tenants and/or sub-tenants engaging in activities prohibited under the Shari’ah guidelines should not exceed 5.0% per annum of the Trust’s gross revenue. On an annual basis, our Shari’ah Advisor, Five Pillars Pte. Ltd. (“Five Pillars”) conducts audit checks to ensure that the business activities conducted by the tenants

are permissible by Shari’ah guidelines. Business activities relating to conventional financial and insurance services, gaming, non-halal production, tobacco-related products, non-permitted entertainment activities and stock-broking in non-compliant securities are considered to be non-permissible. The assessments by the Shari’ah Advisor would then be reported to the Independent Shari’ah Committee which will decide if Sabana REIT is eligible for re-certification as being Shari’ah compliant.

In terms of financing, investment and deposit facilities and insurance and risk management solutions, we will also seek Shari’ah compliant options where commercially available.

Q: Does being Shari’ah compliant limit growth opportunities for Sabana REIT?

A: The majority of the properties within the industrial property sector are Shari’ah compliant by nature i.e. they do not

SHARI’AH COMPLIANCECOMMONLY ASKED

QUESTIONS

house business activities which are non-permissible and thus being Shari’ah compliant does not limit Sabana REIT’s growth prospects. In addition, being Shari’ah compliant allows Sabana REIT to access the Islamic equity markets which has enabled Sabana REIT to access more diverse sources of equity funding and a larger investor base.

Q: How is Sabana REIT different from other listed Shari’ah compliant REITs?

A: Sabana REIT is the only Singapore listed REIT which has obtained a certification issued by an Independent Shari’ah Committee consisting of respected Islamic scholars from Malaysia and Saudi Arabia. The certificate represents an endorsement of Sabana REIT’s compliance with Shari’ah guidelines according to standards generally accepted in GCC states1, such that the total income should not exceed 5.0% of the Trust’s gross revenue. The standards used in the GCC states are typically stricter compared to the other parts of the world, thus making it accessible to even more Shari’ah investors.

Certificate of Shari’ah Compliance

Any non-Shari’ah income generated by Sabana REIT is given away to charitable causes on a quarterly basis. For FY 2016, Sabana REIT’s non-Shari’ah income that was donated represents only approximately 0.1% of Sabana REIT’s gross revenue.

Q: Does Sabana REIT have to comply with prevailing legislation, regulations, accounting standards, guidelines and directives affecting REITs in Singapore or is it only subject to Shari’ah Guidelines?

A: Sabana REIT has to and will comply with prevailing legislation, regulation, accounting standards, guidelines and directives affecting REITs in Singapore. Sabana REIT’s adherence to Shari’ah investment principles and procedures are in addition to the laws, rules and regulations of any other relevant regulatory or supervisory body or agency applicable to Sabana REIT. Where Shari’ah principles conflict with the laws, rules and regulations applicable to Sabana REIT, such laws, rules and regulations shall prevail.

1 Refers to Cooperation Council for the Arab States of the Gulf.

2016SIGNIFICANT EVENTS

MARCH APRIL

AUGUST

• On 25 August, secured a new S$108.0 million term and revolving Commodity Murabaha Facilities due in 2020, further diversifying borrowings maturity profile.

• Held 5th Annual General Meeting (“AGM”) on 12 April 2016.• On 14 March,

announced completion of divestment for 200 Pandan Loop, for a sale price of S$38.0 million.

• On 30 March, announced completion of divestment for 3 Kallang Way 2A for a sale price of S$16.6 million.

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NOVEMBER DECEMBER

• On 5 December, announced proposed divestment of 218 Pandan Loop for a sale price of S$14.8 million2.

• On 8 December, announced proposed acquisition of 72 Eunos Avenue 7 for a purchase consideration of S$20.0 million3.

• On 14 December, announced proposed acquisition of 107 Eunos Avenue 3 for a purchase consideration of S$34.5 million4.

• On 15 December, announced proposed acquisition of 47 Changi South Avenue 2 for a purchase consideration of S$23.0 million5.

• On 20 December, announced an underwritten and renounceable rights issue to raise gross proceeds of approximately S$80.2 million6.

Footnotes1 51 Penjuru Road, 33 & 35 Penjuru Lane

and 18 Gul Drive.2 SGX announcement of the proposed

divestment of 218 Pandan Loop was made on 5 December 2016.

3 SGX announcement of the proposed acquisition of 72 Eunos Avenue 7 was made on 8 December 2016.

4 SGX announcement of the proposed acquisition of 107 Eunos Avenue 3 was made on 14 December 2016.

5 SGX announcement of the proposed acquisition of 47 Changi South Avenue 2 was made on 15 December 2016.

6 SGX announcement of the underwritten and renounceable Rights Issue of 310,712,244 new Units was made on 20 December 2016.

• On 17 November, renewed three master leases1 with the Sponsor.

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Financial Highlights

KEY FINANCIAL FIGURES

S$’000 FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 FY 20111

Gross revenue 91,807 100,824 100,342 89,485 81,768 76,945

Net property income 56,942 71,605 72,946 80,360 76,937 73,074

Distributable income 36,949 50,135 51,624 61,755 59,395 60,603

DPU (cents) 4.642 6.85 7.33 9.38 9.28 8.67

SELECTED BALANCE SHEET DATA

As at 31 As at 31 As at 31 As at 31 As at 31 As at 31 December December December December December DecemberS$’000 2016 2015 2014 2013 2012 2011

Total assets 1,022,889 1,165,399 1,281,660 1,236,753 1,156,538 1,082,316

Borrowings, at amortised costs 437,924 481,084 478,848 447,392 420,800 359,865

Net assets attributable to Unitholders 556,795 653,741 772,585 756,504 702,857 681,782

Units in issue and to be issued entitled to distribution (‘000) 1,053,0843 734,027 725,983 691,959 641,523 637,295

NAV per Unit (S$) 0.754 0.89 1.06 1.09 1.10 1.07

Adjusted NAV per Unit (S$) 0.744 0.88 1.04 1.07 1.07 1.05

Market capitalisation 399,1913 523,652 681,147 746,037 730,159 556,627

1 For the period from 26 November 2010 to 31 December 2011.2 Includes the effects of the Rights Issue that was concluded in January 2017.3 Includes the Rights Units that are to be issued on 25 January 2017.4 Excludes the Rights Units that are to be issued on 25 January 2017.

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5 Ratio of total borrowings and deferred payments over deposited property as defined in the Property Funds Appendix.6 Inclusive of amortisation of transaction costs. 7 Ratio of net property income over profit expense (excluding amortisation and other fees).

BORROWINGS PROFILE

As at 31 As at 31 As at 31 As at 31 As at 31 As at 31 December December December December December December

2016 2015 2014 2013 2012 2011

Aggregate leverage5 43.2% 41.7% 38.0% 36.9% 37.6% 34.1%

Total borrowings (S$ million) 441.1 485.8 486.0 455.8 432.8 364.8

Fixed as % of total borrowings 90.2% 81.9% 88.0% 93.3% 100.0% 96.7%

Weighted average all-in financing cost6 4.2% 4.2% 4.1% 4.1% 4.3% 4.4%

Weighted average tenor of borrowings 1.9 years 2.1 years 3.0 years 2.3 years 3.2 years 2.2 years

Profit coverage ratio7 3.1x 3.8x 4.3x 5.0x 5.4x 7.4x

Unencumbered investment properties (S$ million) 331.5 375.8 328.9 177.7 108.8 46.8

Financial Highlights

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Financial Review

occupancy arising from the conversion of four master leases into multi-tenanted arrangements between FY 2015 to FY 2016.

The increase in the number of multi-tenanted properties and the conversion of certain master leases from triple-net to non-triple-net tenancies during this period had resulted in higher property tax, land rent and property maintenance expenses being incurred for the year. Including the impairment of the trade receivables from the master tenant at 1 Tuas Avenue 4, property expenses increased by 19.3% from the previous year.

REVIEW OF RESULTSFY 2016 was a very challenging year. The full impact of expiry of the 11 master leases in the last quarter of FY 2015 amid a sluggish global economy and Singapore industrial property market had adversely affected the overall performance of Sabana REIT for the year.

Gross revenue declined by 8.9% as compared to FY 2015, mainly attributed to the lower contribution from 200 Pandan Loop and 3 Kallang Way 2A which were divested in 1Q 2016, as well as the full year impact of the negative rental revisions for certain master lease renewals and lower portfolio property

2016 2017 2018 2019 2020

117.8

MATURITY PROFILE OF OUTSTANDING BORROWINGS(As at 31 December 2016)

250

200

150

100

50

0

S$

mil

lion

90.01103.32

130.0

42.8

90.013.3

100.0

75.090.0

30.0

Term CMF Convertible Sukuk Trust Certificates Revolving Murabahah Facility Revolving CMF

Maturities of total outstanding borrowings of S$441.1 million evenly staggered over the next 4 years.

1 Excludes S$50.0 million of undrawn Revolving Murabahah Facility.2 Excludes S$4.7 million of undrawn Revolving CMF.

–

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Consequently, NPI and distributable income for the full year fell by close to 20.5% and 26.3% respectively, to approximately S$56.9 million and S$36.9 million, respectively.

The Group’s total assets decreased by over 12.2% to approximately S$1.0 billion as at 31 December 2016 from S$1.2 billion a year ago, mainly due to full year revaluation loss on investment properties of S$90.9 million and the divestment of 200 Pandan Loop and 3 Kallang Way 2A. Consequently, NAV per unit also declined to S$0.75 at the end of the financial year, as compared to S$0.89 at the beginning of the financial year.

CAPITAL MANAGEMENTDuring the financial year, Sabana REIT successfully refinanced S$138.0 million of term and revolving Commodity Murabaha Facilities (“CMF”) due in November 2016, with a new S$90.0 million term CMF and S$18.0 million revolving CMF maturing in February 2020, with improved terms. The refinancing exercise also further improved the Trust’s borrowings maturity profile.

On 20 December 2016, the Manager launched the Rights Issue to raise gross proceeds of approximately S$80.2 million, mainly to partially finance the proposed acquisitions of 72 Eunos Avenue 7, 107 Eunos Avenue 3 and 47 Changi South Ave 2. The Rights Issue was successfully concluded on 25 January 2017 with a subscription rate of approximately 209.1%. The Rights Issue strengthened Sabana REIT’s balance sheet and increased its financial flexibility by lowering its gearing from 43.2% as at 31 December 2016 following year-end revaluation loss, to approximately 40.0% post Rights Issue.

In accordance with the stated uses in the offer information statement for the Rights Issue, the proceeds from the Rights Issue, net of issue-related expenses, had been fully utilised as at date of this report, partly to repay short-term borrowings and partly placed as short-term bank deposits, pending their deployment for the proposed acquisitions1.

SOURCES OF FUNDING AND PROFIT RATE MANAGEMENTAs at 31 December 2016, Sabana REIT’s sources of funding were as follows:

- 39.4% secured S$195.0 million term CMF;- 3.6% secured S$18.0 million revolving CMF;- 10.1% secured S$50.0 million Revolving

Murabahah Facility;- 8.6% unsecured S$42.8 million Convertible

Sukuk; and- 38.3% unsecured S$190.0 million Trust

Certificates.

As at 31 December 2016, the Trust had S$54.7 million of undrawn revolving credit facilities and S$331.5 million of unencumbered assets available on hand.

During the year, the Manager continued to maintain appropriate hedging of market based risks such as profit rate risks, via a combination of fixed rate funding and individual profit rate swaps for the term CMF, to minimize the impact of profit rate volatility and optimize risk-adjusted returns to Unitholders.

Close to 90.2% of the Trust’s outstanding borrowings of approximately S$441.1 million were on fixed profit rates, compared to 81.9% a year ago, enabling the Trust to keep its weighted average all-in cost of borrowings below 4.2%, largely unchanged from the previous year, in a rising profit rate environment.

Financial Review

1 Please refer to page 89 of the annual report on the utilisation of the Rights Issue proceeds.

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Investor Relations

OUR GUIDING PRINCIPLEAs the Manager, we believe that by providing timely, clear and consistent information, key stakeholders of Sabana REIT can more accurately assess the value proposition of Sabana REIT and make informed investment decisions.

OUR COMMITMENTWe are committed to publishing quarterly financial results within one month from the end of each quarter. Market-sensitive news regarding Sabana REIT are also broadcasted via the SGX-ST website and posted on www.sabana-reit.com on the same day of release.

We are constantly and proactively engaging with our key stakeholders in order to build solid, lasting and trusted relationships. As part of our efforts to keep communication channels open, we regularly hold constructive dialogues with key stakeholders, including unitholders, buy and sell-side analysts, fund managers, potential investors, the media, and the public. In so doing, we believe we will be able to provide the appropriate level of transparency of our operations.

PROACTIVE ENGAGEMENT Our investor relations (IR) team is easily contactable via phone and emails. Queries and concerns of

stakeholders are addressed promptly. To encourage participation by our unitholders, we have continued to hold AGMs at locations which are easily accessible by public transportation. Sabana REIT’s 2016 AGM was held in April 2016 at Suntec Singapore International Convention & Exhibition Centre. The event was well-received and we were pleased with the turnout of approximately 250 unitholders.

EFFECTIVE COMMUNICATIONSDuring the year, the senior management and our IR team continued to regularly communicate with analysts and the media via phone calls, emails or face-to-face meetings. We believe that reaching out to them will result in positive independent coverage of Sabana REIT, giving the investment community a greater understanding of our strategies as well as financial and operational performances. In addition, we held quarterly briefings for sell-side analysts the day after the release of Sabana REIT’s quarterly or annual results to answer any queries they may have. We also engaged proactively with the investment community through meetings, teleconferences as well as investor conferences and roadshows. These engagements had allowed us to receive analysts’ and investors’ feedback on our performance and to respond in a timely manner to any possible concerns.

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UNITHOLDERS’ ENQUIRIESIf you would like to find out more about Sabana REIT, please contact:

Sabana Real Estate Investment Management Pte. Ltd.

Phone: (65) 6580 7750Fax: (65) 6280 4700

151 Lorong Chuan #02-03 New Tech Park

Singapore 556741

Email: [email protected]: www.sabana-reit.com

Investor & Media Relations Activities in FY 2016

1st Quarter 2nd Quarter

3rd Quarter 4th Quarter

• Analysts’ Results for 4Q 2015 Financial Results

• Sabana REIT’s 5th AGM• Analysts’ Results Briefing

for 1Q 2016 Financial Results

• Analysts’ Results Briefing for 2Q 2016 Financial Results

• IFN Investor Forum 2016 (Le Meridian, Kuala Lumpur)

• Analysts’ Results Briefing for 3Q 2016 Financial Results

Investor Relations

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Unit Performance

In FY 2016, the total return and unit price performance decreased by 33.5%1 and 39.2% respectively. As at 31 December 2016, Sabana REIT closed at S$0.383, 39.2% lower than the opening of the year. This translated into a market capitalization of approximately S$399.2 million4.

TRADING DATA BY YEAR5

Unit Price (S$) 20163 2015 2014 2013 2012 2011

Opening 0.625 0.940 1.080 1.145 0.875 0.975

Last done at year-end 0.380 0.715 0.940 1.080 1.140 0.875

Highest 0.625 0.940 1.085 1.380 1.150 1.020

Lowest 0.380 0.705 0.905 1.035 0.875 0.835

Unit price performance (%)6 (39.2) (23.9) (13.0) (5.7) 30.3 (10.3)

Trading volume (million units) 192.6 199.8 282.4 411.7 298.9 304.6

1 Sum of distributions and capital appreciation for FY 2016 over the opening unit price of S$0.625 on 4 January 2016. Price is adjusted for 310,712,244 Rights Units to be issued on 25 January 2017.

2 Source: Bloomberg.3 Adjusted for 310,712,244 Rights Units to be issued on 25 January 2017.4 Based on 739,791,059 units issued as at 31 December 2016 and 310,712,244 Rights Units to be issued on 25 January 2017.5 Source: ShareInvestor.6 Difference between the closing Unit price on the last trading day of the year and the opening Unit price on the first trading day of the year. 7 Adjusted for rights issue announced on 20 December 2016; for Q1-Q3 declared DPU, applied an adjustment factor calculated as reported theoretical ex-rights

price (“TERP”) / unaffected closing Unit price prior to Rights Issue announcement, or S$0.432 / S$0.505; Q4 declared DPU not adjusted.8 Difference between the closing Unit price on 30 December 2016 and the opening Unit price on 4 January 2016.9 Based on total DPU declared for FY 2016. Yield based on end of period Unit price; 30 December 2016 Unit price of S$0.38.

RETURN ON INVESTMENT (FROM 1 JANUARY 2016 TO 31 DECEMBER 2016)7

%

Total Return2 (33.5)

Capital Appreciation8 (39.2)

Distribution Yield9 10.8

20


TRADING PERFORMANCE IN FY 2016

TRADING PERFORMANCE SINCE IPO

Closing Unit Price (S$) Daily Volume Traded (million Units)

0.70

0.65

0.60

0.55

0.50

0.45

0.40

0.35

0.30

8

7

6

5

4

3

2

1

0


JAN

FE

B

MA

R

AP

R

MA

Y

JUN

JUL

AU

G

SE

P

OC

T

NO

V

DE

C

Source: ShareInvestor

Daily Volume Traded (million units) Closing Price (S$)

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0

20

18

16

14

12

10

8

6

4

2

0

DE

C 2

010

JAN

201

1F

EB

201

1M

AR

201

1A

PR

201

1M

AY

2011

JUN

201

1JU

L 2

011

AU

G 2

011

SE

P 2

011

OC

T 2

011

NO

V 2

011

DE

C 2

011

JAN

201

2F

EB

201

2M

AR

201

2A

PR

201

2M

AY

2012

JUN

201

2JU

L 2

012

AU

G 2

012

SE

P 2

012

OC

T 2

012

NO

V 2

012

DE

C 2

012

JAN

201

3F

EB

201

3M

AR

201

3A

PR

201

3M

AY

2013

JUN

201

3JU

L 2

013

AU

G 2

013

SE

P 2

013

OC

T 2

013

NO

V 2

013

DE

C 2

013

JAN

201

4F

EB

201

4M

AR

201

4A

PR

201

4M

AY

2014

JUN

201

4JU

L 2

014

AU

G 2

014

SE

P 2

014

OC

T 2

014

NO

V 2

014

DE

C 2

014

JAN

201

5F

EB

201

5M

AR

201

5A

PR

201

5M

AY

2015

JUN

201

5JU

L 2

015

AU

G 2

015

SE

P 2

015

OC

T 2

015

NO

V 2

015

DE

C 2

015

JAN

201

6F

EB

201

6M

AR

201

6A

PR

201

6M

AY

2016

JUN

201

6JU

L 2

016

AU

G 2

016

SE

P 2

016

OC

T 2

016

NO

V 2

016

DE

C 2

016


Daily Volume Traded Closing Price (S$)

Unit Performance


21


Unit Performance

COMPARATIVE TRADING PERFORMANCE SINCE IPO

150

130

110

90

70

50

30

Rebased (%)

DE

C 2

010

JAN

201

1F

EB

201

1M

AR

201

1A

PR

201

1M

AY

2011

JUN

201

1JU

L 2

011

AU

G 2

011

SE

P 2

011

OC

T 2

011

NO

V 2

011

DE

C 2

011

JAN

201

2F

EB

201

2M

AR

201

2A

PR

201

2M

AY

2012

JUN

201

2JU

L 2

012

AU

G 2

012

SE

P 2

012

OC

T 2

012

NO

V 2

012

DE

C 2

012

JAN

201

3F

EB

201

3M

AR

201

3A

PR

201

3M

AY

2013

JUN

201

3JU

L 2

013

AU

G 2

013

SE

P 2

013

OC

T 2

013

NO

V 2

013

DE

C 2

013

JAN

201

4F

EB

201

4M

AR

201

4A

PR

201

4M

AY

2014

JUN

201

4JU

L 2

014

AU

G 2

014

SE

P 2

014

OC

T 2

014

NO

V 2

014

DE

C 2

014

JAN

201

5F

EB

201

5M

AR

201

5A

PR

201

5M

AY

2015

JUN

201

5JU

L 2

015

AU

G 2

015

SE

P 2

015

OC

T 2

015

NO

V 2

015

DE

C 2

015

JAN

201

6F

EB

201

6M

AR

201

6A

PR

201

6M

AY

2016

JUN

201

6JU

L 2

016

AU

G 2

016

SE

P 2

016

OC

T 2

016

NO

V 2

016

DE

C 2

016

26 N

OV

201

0


Sabana REIT FTSE ST Real Estate(RE) Index FTSE ST REIT Estate STI

COMPARATIVE FIELDS

10 Based on Sabana REIT’s closing unit price of S$0.38 as at 30 December 2016 and annualized DPU for the period from 1 October 2016 to 31 December 2016. Adjusted for 310,712,244 Rights Units issued on 25 January 2017.

11 Source: “Weekly S-REITS Tracker”. OCBC Investment Research. 3 January 2017. 12 Monetary Authority of Singapore data as at 31 December 2016. Source: https://secure.sgs.gov.sg/fdanet/BenchmarkPricesAndYields.aspx. Monetary Authority

of Singapore. Web. 16 January 2017. 13 Minimum 4% interest rate for Special, Medisave and Retirement Account monies to be extended until 31 December 2017. Source: https://www.cpf.gov.sg/

members/News/news-categories-info/news-releases/2324. Central Provident Fund Board. Web. 21 September 2016. 14 Average rates compiled from that quoted by 10 leading banks and finance companies. Source: https://secure.mas.gov.sg/msb/InterestRatesOfBanksAndFinance-

Companies.aspx. Monetary Authority of Singapore. Web. 16 January 2017.

Yiel

d pe

r an

num

Sabana REIT’s 4Q 2016 Annualised

Yield10

S-REITForwardYield11

Singapore Govt10-year Bond12

CPF OrdinaryAccount13

Banks 12-MonthFixed Deposits14

9.2%

7.3%

2.5% 2.5%0.35%

22


Independent Market Study

1 OVERVIEW OF SINGAPORE ECONOMY

1.1 Singapore economic performance

Singapore’s Gross Domestic Product (“GDP”) grew by 2.0 per cent annually for the whole of 2016, similar to the growth recorded in 2015 (Exhibit 1-1). The modest growth rate was largely influenced by macroeconomic uncertainties spanning from global events such as the Brexit, Trump presidency in the US, and slowdown in China’s economy.

Singapore saw an inflation of a negative 0.5 per cent in 2016, largely due to the decline in retail goods inflation which more than offset the increase in services inflation.

Exhibit 1-1: Singapore GDP growth and Inflation rate, 2007 to 2016

Source: MTI, Singstat, Knight Frank Research

1.2 Manufacturing output and investment commitments

According to Singapore’s Index of Industrial Production, the manufacturing sector saw an expansion in output by 3.6 per cent annually in 2016, after a contraction of 5.1 per cent in 2015. For the whole of 2016, output for electronics cluster, biomedical manufacturing cluster and precision engineering cluster rose 15.9 per cent, 13.6 per cent and 0.8 per cent respectively compared to 2015.

Conversely, output for the chemicals cluster, general manufacturing cluster and transport engineering cluster fell by 0.9 per cent, 2.5 per cent and 17.8 per cent respectively in 2016 compared to 2015.

Singapore received close to S$5.8 billion in total manufacturing fixed asset investment (“FAI”) in the whole of 2016, 30.1 per cent lower than the S$8.3 billion for 2015 (Exhibit 1-3). The cutback in investment is largely broad-based, with the most significant stemming from the chemicals cluster which accounted for 22.4 per cent of total manufacturing FAI. The electronics cluster, constituting 37.9 per cent of total manufacturing FAI, saw investment commitments fall by 32.6 per cent in 2016 compared to 2015.

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0

-2.0

Ann

ual

% c

hang

e (%

)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

GDP Growth Inflation Rate

By Knight Frank

23



The precision and transport engineering clusters experienced a significant surge in FAI by 809.1 per cent for 2016, albeit from a low base in 2015.

Exhibit 1-2: Singapore Index of Industrial Production, 2007 to 2016

Source: Singstat, Knight Frank Research

Exhibit 1-3: Total Manufacturing Fixed Asset Investments (FAI), 2007 to 2016

Source: EDB, Knight Frank Research

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

-5.0

-10.0

Ann

ual

% c

hang

e (%

)

2007 2010 2011 2012 2013 2014 2016

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

S$

mil

lion

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2008 2009 2015

General Manufacturing Industries Transport Engineering Precision Engineering Biomedical Engineering Chemicals Electronics

24



1.3 Manufacturing sector

According to the Economic Development Board (“EDB”)’s monthly manufacturing performance for December 2016, Singapore’s manufacturing output increased 21.3 per cent y-o-y, notably higher than the 11.9 per cent y-o-y growth in November 2016.

All clusters, except the transport engineering cluster, expanded in December 2016. Growth in the electronics cluster (49.4 per cent y-o-y) was largely supported by a 94 per cent increase in output from the electronics cluster. The biomedical manufacturing cluster expanded 44.9 per cent y-o-y in December 2016 due to higher production in the pharmaceutical segment (53.8 per cent y-o-y) and higher output in the medical technology segment (19.0 per cent y-o-y). The precision engineering cluster expanded 6.1 per cent y-o-y on the back of higher export demand for the machinery & systems segment (8.5 per cent y-o-y) and higher output for the precision modules & components segment in December 2016. Similarly, growth seen in the chemical cluster (4.1 per cent y-o-y) was supported by increased output in the petrochemicals (18.4 per cent y-o-y), petroleum (16.7 per cent y-o-y) and specialties (4.1 per cent y-o-y) segments, which was partly offset by decline of 12.6 per cent in the other chemicals segment. In contrast, the transport engineering cluster contracted 10.5 per cent y-o-y due to uneven growths registered for the key segments for the aerospace segment (15.0 per cent y-o-y), land transport segment (11.5 per cent y-o-y), marine & offshore engineering segment (-26.1 per cent y-o-y) in December 2016. The Singapore Purchasing Managers’ Index (“PMI”) improved from 49.0 in January 2016 to 50.6 in December 2016. The PMI was in contraction territory between January and August 2016 due to lower demand in new orders, new export and the production output. Since September 2016, the PMI improved with gradual expansion of new orders, new export and higher production output.

Exhibit 1-4: Singapore Purchasing Managers’ Index (“PMI”) from January to December 2016

Source: Singapore Institute of Purchasing & Materials Management (SIPMM), Knight Frank Research

PM

I (%

)

52.0

51.0

50.0

49.0

48.0

Expansion

Contraction

JAN

-16

FE

B-1

6

MA

R-1

6

AP

R-1

6

MA

Y-16

JUN

-16

JUL

-16

AU

G-1

6

SE

P-1

6

OC

T-16

NO

V-16

DE

C-1

6

25



1.4 Singapore Economic Outlook for 2017

Based on advanced estimates by Ministry of Trade and Industry (MTI), the Singapore’s economy grew by 2.0 per cent for the whole of 2016. Singapore’s economy is projected to grow at a modest pace for the rest of the year with sectors such as electronics, information & communications and ‘other services industries’ likely to support growth, while the wholesale trade and finance & insurance sectors could continue to face external headwinds.

Come 2017, Singapore’s open economy remains largely influenced by unfolding global events. While global growth could improve slightly in 2017 on the back of positive economic growth prospects in economies such as the US, Japan and Southeast Asian markets, downside risks in the global economy persists. First, the possible backlash against globalisation and free trade especially from the US could cast a pall on global trade growth. Second, the continuing uncertainties in the UK and EU economies from Brexit may impact global financial market performance and economic growth in Europe. In addition over in Asia, the rising corporate debt levels amid economic restructuring in China, coupled with risks of sharper-than-expected property price corrections could weigh on economic growth prospects of the world’s second largest economy. These uncertainties and subsequent headwinds would inevitably affect business and consumer confidence both globally and in Singapore.

Against this macroeconomic backdrop and barring full actualisation of downside risks, the growth outlook for Singapore’s economy is expected to be modest in 2017 and MTI forecasts economic growth at a pace of 1.0 to 3.0 per cent. The manufacturing sector is forecast to see an uptick in performance with the prospect of sustained global demand for semi-conductors and semi-conductor equipment, while the marine & offshore engineering segment and firms supporting the global oil and gas industry could see continual challenges and muted demand conditions amidst low oil prices. Externally-oriented services sectors such as finance & insurance and wholesale trade are expected to remain sluggish. On potential growth sectors, information & communications and ‘other services industries’ are likely to continue to support growth, while tourism-related sectors such as accommodation & food services could benefit from a boost in travel demand as global economic outlook improves.

2 SINGAPORE GOVERNMENT POLICIES ON INDUSTRIAL PROPERTY MARKET

2.1 Revised subletting rules for REITS from Housing & Development Board (“HDB”)

With effect from 1 January 2016, HDB allows REITS to sublet 100% of the GFA whereby 70% of the GFA must be sublet to anchor tenant(s).

2.2 Consolidation of HDB industrial land and properties under JTC by Q1 2018

On 19 October 2016, JTC Corporation (JTC) announced that by the first quarter of 2018, some 10,700 industrial units and 540 industrial land leases under the HDB will be transferred to JTC. The consolidation of all public sector industrial land and properties under a single government agency will enable the Government to better support industrialists, in particular small and medium enterprises (SMEs), in their business growth. According to JTC, the contracted terms and conditions of all HDB tenancies and leases with HDB will remain unchanged for the duration of the tenancy or lease contracts.

26



Industrialists will have one-stop access to the full range of public sector industrial facilities available. They will receive better support for their land and space needs across the different stages of their growth, as JTC will be able to better match their needs with a larger supply of industrial land and space.

The move also enables the Government to undertake more comprehensive master-planning of industrial estates across Singapore, as well as to facilitate more efficient clustering of complementary activities and integration of activities along the value chain. With the consolidation, some 16,300 industrial units and 3,640 land leases with total land area of 8,100 hectares will be under JTC’s fold1.

3 REVIEW OF PRIVATE FACTORY MARKET SEGMENT

3.1 Supply, Demand and Occupancy

As at Q4 2016, the existing stock of private factory space totalled 340.5 million sq ft NLA, a 4.2 per cent annual increase from the same period in 2015. Of which, 65.8 per cent (224.2 million sq ft) were single-user factory while multiple-user factory and business park space accounted for the remaining 28.4 per cent (96.8 million sq ft) and 5.7 per cent (19.5 million sq ft) respectively. Net new supply stood at 13.7 million sq ft in 2016, a 16.1 per cent y-o-y increase, and is 20.0 per cent higher than the ten-year average annual net new supply of 11.4 million sq ft between 2007 and 2016.

Exhibit 3-1: Selected Major Private Factory Completions in 2016

Development Location Region Developer

Approximated Gross Floor

Area (“GFA”) sq ft

Q1 2016

T99 1, 1A, 3, 3A, 5, 5A, 5B, 7, 7A, 7B, 9 Tuas South

Avenue 10

West Region

Soon Hock Group Pte Ltd

596,000

Ascent 2 Science Park Drive Central Region

Ascendas Land (S) Pte Ltd

555,000

Loyang Enterprise Building

56 Loyang Way West Region

OKH Global Ltd 555,000

E9 Premium 61 Woodlands Industrial Park E9

North Region

Incorporated Woodlands Pte Ltd

451,000

Single-user factory

535 Yishun Industrial Park A

North Region

ASM Technology Singapore Pte Ltd

268,000

1 Source: The Business Times: ‘All HDB Industrial Space to be under JTC by Q1 2018’, 20 October 2016

27



Development Location Region Developer

Approximated Gross Floor

Area (“GFA”) sq ft

Q2 2016

West Connect Building

10 Buroh Street West Region

Publique Realty (Jurong) Pte Ltd

737,000

Single-user factory

622 Lorong 1 Toa Payoh

Central Region

Philips Electronics Singapore

Pte Ltd

409,000

Single-user factory

33 Kaki Bukit Road 6 East Region

SEF Group Ltd 351,000

Woodlands Industrial Xchange

71 Woodlands Avenue 10

North Region

BH-ZACD (Woodlands) Pte Ltd

288,000

Q3 2016

Single-user factory

1 North Coast Drive North Region

Micron Semiconductor Asia Pte Ltd

1,655,000

Single-user industrial development

8 Bulim Avenue West Region

Supply Chain City Pte Ltd

1,425,000

Mapletree Business City II

40, 50, 60, 70 & 80 Pasir Panjang Road

Central Region

Mapletree Business City Pte Ltd

1,344,000

The Index 110 Tuas South Avenue 3

West Region

Grow-Tech Properties Pte Ltd

596,000

Single-user factory

42A Penjuru Road West Region

Mencast Marine Pte Ltd 392,000

Single-user factory

1 Tuas South Way West Region

Shell Eastern Petroleum Pte Ltd

384,000

Interlocal Centre

100G Pasir Panjang Road

Central Region

Interlocal Exim Pte Ltd 380,000

Q4 2016

Greyform Building

21, 23 Kaki Bukit Road 6

Central Region

Straits Construction Singapore Pte Ltd

346,000

Mapletree 18 18 Tai Seng Street East Region

Mapletree Trustee Pte Ltd

443,000

Multiple-user factory

1, 1A Depot Close Central Region

Mapletree Industrial Trust Management Ltd

825,000

Single-user factory

8 Yung Ho Road West Region

Singapore Telecommunications Ltd

568,000

Source: JTC, Knight Frank Research

28



Overall net new demand for private factory space slipped 7.2 per cent y-o-y in 2016, to 9.1 million sq ft in 2016. This is about 6.8 per cent lower than the ten-year average annual net new demand of 9.8million sq ft between 2007 and 2016.

The higher supply and lower demand for factory spaces dragged occupancy of private factory space to 88.9 per cent in 2016. In particular, occupancy rate for private single-user factory space declined from 91.9 per cent in Q4 2015 to 90.4 per cent in Q4 2016 with some industrialists undergoing rationalization of their business operations manage operating costs.

Exhibit 3-2: Net New Supply, Net New Demand and Occupancy of Private Factory Space


3.2 Potential Supply

As at Q4 2016, an estimated 25.5 million sq ft GFA of new private factory space is set for completion between 2017 and 2021. Of which, single-user factory space accounted for 67.9 per cent (17.3 million sq ft), while multiple-user factory and business parks constitute the remaining 31.0 per cent (7.9 million sq ft) and 1.1 per cent (0.2 million sq ft) respectively. The bulk of upcoming private factory space (48.8 per cent or 12.5 million sq ft) is expected to be ready by the end of 2017.

25,000

20,000

15,000

10,000

5,000

0

Net

floo

r ar

ea (

‘000

sq

ft)

93.0

92.5

92.0

91.5

91.0

90.5

90.0

89.5

89.0

88.5

88.0O

ccup

ancy

rat

e (%

)2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net New Supply Net New Demand Occupancy Rate

10-year Average Annual Net New Demand of 9.8 milion sq ft between 2007 and 2016

10-year Average Annual Net New Supply of 11.4 milion sq ft between 2007 and 2016

29



A total of 11 industrial sites (with a combined site area of 11.25 ha) are listed in H1 2017 under the Industrial Government Land Sales (“IGLS”) Programme. Six sites are placed under the Confirmed List while the remaining five sites on the Reserve List, totalling about 0.6 million sq ft and 1.6 million sq ft of future potential industrial space, respectively. As a continued approach from the Singapore government to keep business costs affordable for genuine industrialists, smaller sites with shorter lease tenures of between 20 to 30 years are launched for H1 2017.

Exhibit 3-3: Upcoming Major Factory Developments in 2017

Development Location Region DeveloperEstimated GFA (sq ft)

Multiple-user factory Depot Road Central Region

Mapletree Industrial Trust Management Ltd

421,000

Nordcom One Gambas Crescent North Region

Growth-Tech Properties Pte Ltd

325,000

Proxima @ Gambas Gambas Crescent North Region

NSS Realty Pte Ltd 422,000

Single-user factory Airport Road Central Region

Soilbuild Pte Ltd 338,000


Exhibit 3-4: Potential Supply of Private Factory Space


14,000

12,000

10,000

8,000

6,000

4,000

2,000

0Gro

ss F

loor

Are

a (‘0

00

sq f

t)

2017F 2018F 2019F 2020F 2021F

Averge Annual Potential Supply of 6.2 million between 2017 and 2020

30



3.3 Rents

Island-wide median rent of overall factory space is estimated at $1.82 per sq ft per month in 2016, posting an annual fall of 4.2 per cent. JTC rental index for business park improved 0.5 per cent y-o-y, but rental indices for single-user and multiple-user factory space declined by 6.6 per cent and 7.7 per cent respectively on an annualized basis. The completion of new business park spaces have jostle business park rents upwards, while the softer economic environment continued to dampen single-user and multiple-user factory rents.

Exhibit 3-5: JTC Median Rents and Rental Indices of Private Factory Space by Types, as at Q4 2016

* Median rents based on island-wide actual rental transaction and as at fourth quarter of each corresponding year** JTC rental indices include private factory transactions only. The rental indices for single-user factory and business park space are available from 2012

onwards


3.4 Prices

A total of 691 caveats2 were lodged in 2016 for upper-floor strata-titled factory units, a 21.7 per cent decline from 2016 and registering the lowest transaction volume since the implementation of Seller’s Stamp Duty (SSD) in 2013. Overall island-wide average price of upper-floor strata-titled factory units improved by 4.8 per cent y-o-y to S$349 per sq ft in Q4 2016. In comparison, JTC price indices of multiple-user and single-user factory slipped 6.8 per cent y-o-y and 12.1 per cent y-o-y respectively.

3.00

2.50

2.00

1.50

1.00

0.50

0

S$

per

sq f

t pe

r m

onth

120

110

100

90

80

70

60

50

Inde

x (B

ase

= Q

4 20

12)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Median Rent Single-user Factory Rental Index Multiple-user Factory Rental Index Business Park Rental Index

2016

2 Based on caveats lodged from REALIS as at 25 January 2017

31



Exhibit 3-6: JTC Price Indices and Average Price of Factory Space, as at Q4 2016

* Average prices are based on caveats lodged in REALIS and accounted for only upper floor strata-titled factory units (as at 25 January 2017)

Source: JTC, REALIS, Knight Frank Research

3.5 Investment Sales

For the first half of 2016, investment sales volume of private factories (including business parks) stood at a total investment value of S$276.1 million. Investment sales value surged to a total of S$253.4 billion for the second half of 2016. Total investment sales of private factories (including business parks) totalled S$529.5 million3 for the whole of 2016.

Exhibit 3-7: Top Major Private Factory Investment Sales in 2016

Key Private Factory Investment Sales in 2016

Property Location Tenure PurchaserGFA

(sq ft)Price (S$)

Q1 2016

Harper Kitchen Harper Road Freehold Consortium led by Nanshan

Group

54,239 51,100,000

22 Senoko Way Senoko Way LH 30 years wef 1 March 1990

Thong Siek Food Industry

Pte Ltd

N.A. 15,000,000

Swee Hin Building 91 Defu Lane LH 30 years wef 1 May 1990

N.A. N.A. 22,300,000

Eunos Techpark 2 Kaki Bukit Place

LH 60 years wef 20 Nov 1995

N.A. N.A. 10,200,000

120

110

100

90

80

70

60

50

40

30

Pri

ce I

ndex

(B

ase

= Q

4 20

12)

500

450

400

350

300

250

200

150

100

Ave

rage

Pri

ce (

S$

psf)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Single-user Factory Rental Index Multiple-user Factory Rental Index Average price

3 Information accurate as at 2 February 2017

32



Property Location Tenure PurchaserGFA

(sq ft)Price (S$)

Q2 2016

Bukit Batok Connection

Bukit Batok Street 23

LH 30 years wef 26 Nov 2012

Soilbuild Business Space

REIT

403,592 96,300,000

38 Alexandra Terrace

38 Alexandra Terrace

Freehold Secura Group Limited

N.A. 16,500,000

55 Kranji Crescent 55 Kranji Crescent

LH 19 years wef 1 Feb 2006

Samwoh Premix Pte.

Ltd.

N.A. 12,300,000

1 Tuas Basin Link 1 Tuas Basin Link

LH 60 + 30 years wef 16 Jul 1994

Avance Living Pte Ltd

N.A. 10,000,100

Q3 2016

75 Tuas South Street 5

75 Tuas South Street

5

LH 30 + 24 years wef 1 Jan 2006

N.A N.A. 16,000,000

Sinar Mas Building 118 Pioneer Road

LH 30 + 30 years wef 1 Jan 1996

N.A N.A. 26,030,000

Q4 2016

6 Chin Bee Avenue Chin Bee Avenue

LH 30 years wef 16 Oct 2013

Viva Industrial Trust

324,166 87,300,000

107 Eunos Avenue 3

Eunos Avenue 3

LH 30 years wef 1 Jan 2011

Sabana REIT 133,946 34,500,000

26 Senoko Way Senoko Way N.A. Kee Song Bio-Technology

N.A. 24,811,370

Notes:To be considered as private investment sales under Knight Frank Research definition, it must fulfil either one of the following pre-requisite:-• Investment transactions should comprise an entire building or property with a total worth of S$10 million and above; OR• Any bulk sales within a development which amounts to S$10 million or more*Figures stated are based on Net Lettable Areas


33



3.6 Outlook

Modest demand likely for private factory segment along with muted manufacturing prospects

The confluence of macroeconomic and domestic factors - slower global demand, China economic growth moderation, weakness of the oil & gas sector and cautious business and consumer sentiment is expected to weigh on Singapore’s industrial property market performance for the whole year of 2017. Apart from electronics, precision engineering and food manufacturing clusters that could potentially outperform and support the overall manufacturing sector in 2017, the chemicals cluster and marine & offshore engineering segment are envisaged to remain relatively weak in the near term till the benefits of a possible oil price recovery filter through these industries over a longer period of time. Impacted by weak order books amid low oil prices, key and supporting trades in the oil & gas sector are likely to exercise caution in expansion or relocation plans of their industrial real estate.

The prospect of a subdued economic outlook and potentially muted overall performance of the manufacturing sector are exerting pressures on industrialists and SME end-users to manage their occupancy and operating costs more tightly. Additionally, the influx of upcoming supply of 52.1 million sq ft of overall industrial space from end-2016 to 2020, of which 23.3 million sq ft (45 per cent of total) is slated for completion by 2017, would provide ample choices for industrial tenants and users, intensifying competition in the sales and leasing markets and constraining price and rental growth in the near term.

After posting steeper y-o-y declines in the third quarter of 2016, overall industrial property prices and rentals are forecast to register y-o-y declines of between -10 per cent to -8 per cent movement by the last quarter of 2016, with possibly similar magnitude of fall for 2017 should manufacturing sector performance remain weak for next year.

With industrial property cooling measures likely to remain in place and coupled with the challenging business climate, transaction of strata-titled multiple-user factory units could stay relatively sluggish over the next two to three quarters, especially for shorter balance lease tenures. Coupled with an upcoming injection of 5.8 million sq ft GFA of new multiple-user factory space in 2017, average price of multiple-user factory space could adjust downwards by between -6 and -4 per cent y-o-y by Q4 2017. Average rents for multiple-user factory space is envisaged to fall by a larger magnitude, of between -8 and -5 per cent y-o-y in Q4 2017, barring unforeseen macroeconomic circumstances and policy changes.

The demand for single-user factory spaces is expected to remain subdued for the last quarter of 2016 and through to 2017. Despite the high upcoming new supply, most of the sublet tenants prefer to be located near their supporting trades and would avoid incurring high relocation costs. Hence, prices are expected to trend lower with an overall -11 to -13 per cent y-o-y fall in this segment by Q4 2016, while rentals could register -7 to -9 per cent y-o-y decline for the same period. Prices and rents could decline further by -7 to -5 per cent y-o-y by Q4 2017.

34



New better quality multiple-user industrial spaces poised to uplift industrial landscape

The sale of industrial sites to private developers under the iGLS programme in recent years would introduce new industrial spaces with better specifications for end-users. Additionally, JTC’s plans to develop higher quality large-scale integrated facilities to amalgamate key and supporting industrial trades are progressing with major hubs such as JTC Chemicals Hub @ Tuas South, JTC Food Hub @ Senoko, JTC nanoSpace @ Tampines to be completed by end-2016 and 2017. These new developments serve to uplift and upscale the overall standard of Singapore’s industrial properties, breaking new grounds to plan, design and house various industrial trades and shared facilities more efficiently. The injection of these new developments, along with JTC’s efforts, would spur the industry’s transformation towards higher productivity and competitiveness.

Flight to business parks for qualifying tenants expected to slow from mid-2017 as office-business park rental gap narrows

Against the backdrop of potential stable demand from a larger pool of qualifying trades such as technology, media and telecommunications, medical technology and e-commerce, the outlook for business park segment is envisaged to stay fairly healthy in 2017. With the high occupancy of business parks and the gradual convergence of office and business park rentals, the ‘flight for rent savings’ from office to business park spaces by qualifying tenants is envisaged to slow from mid-2017 onwards.

Supported by the limited new supply of business park space beyond 2016 despite the prevailing muted economic outlook, occupancy is likely to remain stable especially for better-designed and well-located business park developments in 2017. Island-wide occupancy is expected to hover between 80.0 to 85.0 per cent, while rents may see sideway trending of between minus 1 per cent drop to 2 per cent y-o-y growth by Q4 2017.

4 REVIEW OF WAREHOUSE MARKET SEGMENT

4.1 Supply, Demand and Occupancy

As at Q4 2016, the existing stock of private warehouse space totalled 101.4 million sq ft NLA, or a 7.2 per cent annual increase from 2015. Net new supply increased by 33.1 per cent y-o-y in 2016 to register at 6.8 million sq ft. This is 43.6 per cent higher than the ten-year average annual net new supply of 3.8 million sq ft between 2007 and 2016.

35



Exhibit 4-1: Selected Major Private Warehouse Completions in 2016

Development Location Region DeveloperEstimated

GFA (sq ft)

Q1 2016

Mapletree Logistics Hub

5B Toh Guan Road East

West RegionMapletree Logistics

Trust Management Ltd684,000

Q2 2016

SingPost Regional eCommerce Logistics Hub

37,39 Greenwich

DriveNorth Region Singapore Post Limited 553,000

Warehouse development

6 Chin Bee Avenue

North RegionSharikat National Pte

Ltd324,000

Q3 2016


18 Sungei Kadut North RegionWorld Furnishing Hub

Pte Ltd296,000

Q4 2016


30 Tuas West Road

West RegionAIMS AMP Capital

Industrial REIT288,000


Net new demand for private warehouse space increased 3.3 per cent to 4.4 million sq ft in 2016 from the previous year. Comparatively, this is about 21.5 per cent higher than the ten-year average annual net new demand of 3.5 million sq ft between 2007 and 2016, indicating a relatively healthy demand for private warehouse space. With the new supply of warehouse space exceeding demand, occupancy declined by 1.7 ppt from 91.4 per cent in 2015 to 89.7 per cent in 2016.

36



Exhibit 4-2: Net New Supply, Net New Demand and Occupancy of Private Warehouse Space


4.2 Potential Supply

As at Q4 2016, about 12.0 million sq ft GFA new private warehouse space is set for completion between 2017 and 2021. The bulk of new supply (80.3 per cent or 9.6 million sq ft) is expected to be ready by the end of 2017.

Exhibit 4-3: Potential Supply of Private Warehouse Space


8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Net

floo

r ar

ea (

‘000

sq

ft)

95.094.594.093.593.092.592.091.591.090.590.089.589.088.588.0

Occ

upan

cy r

ate

(%)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net New Supply Net New Demand Occupancy Rate

12,000

10,000

8,000

6,000

4,000

2,000

0Gro

ss F

loor

Are

a (‘0

00

sq f

t)

2017F 2018F 2019F 2020F 2021F

Average Annual Potential Supply of 3.0 million between 2017 and 2020

10-year Average Annual Net New Demand of 3.5 milion sq ft between 2007 and 2016

10-year Average Annual Net New Supply of 3.8 milion sq ft between 2007 and 2016

37



Exhibit 4-4: Selected Upcoming Major Warehouse Completions in 2017

Development Location Region DeveloperEstimated GFA (sq ft)


Benoi Road West RegionGKE Warehousing & Logistics Pte Ltd

428,000


Pandan Road West RegionPoh Tiong Choon Logistics Limited

548,000


Pioneer Road West RegionHSBC Institutional Trust Sevices (Singapore) Ltd

772,000


Pioneer Road West Region Toll Logistics (Asia) Ltd 1,089,000


4.3 Rents

As at Q4 2016, island-wide median rent of warehouse space slipped to $1.84 per sq ft per month, 8.0 per cent lower compared to the previous year. JTC rental index of warehouse space saw an annual decline of 6.4 per cent in 2016. This was attributed to the surplus supply of warehousing space, and a tighter restriction over industrial space usage through the JTC subletting rule where anchor tenants have to occupy at least 70 per cent of the building GFA.

Exhibit 4-5: JTC Median Rents and Rental Index of Warehouse Space

*Median rents based on island-wide actual rental transaction and as at fourth quarter of each corresponding year*JTC rental index is based on private warehouse rental transactions


2.5

2.0

1.5

1.0

0.5

0.0

S$

per

sq f

t pe

r m

onth

120

100

80

60

40

20

0

Inde

x (B

ase

= Q

4 20

12)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Median Rent Rental Index

38



4.4 Prices

As at Q4 2016, there were 38 caveats4 lodged for upper-floor strata-titled warehouse units, 19.1 per cent lower than the 47 caveats lodged in 2015. Average prices of upper-floor strata-titled warehouse units slipped to S$488 per sq ft in Q4 2016. Exhibit 4-6: Average Price of Warehouse Space, as at Q4 2016

*There is no available JTC price index since Q4 2014 due to insufficient transactions to compile an index that is reflective of the warehouse market *Average prices are based on caveats lodged in REALIS and accounted for only upper floor strata-titled warehouse units (as at 28 January 2017)


4.5 Investment Sales

The private warehouse investment activities stood at S$49.1 million in first half of 2016 and increased to S$181.2 million in the second half of 2016. Total private investment sales for warehouses amounted to S$230.3 million for the whole of 2016. Amid challenging business environment for industrialists, REITs are particularly actively seeking for potential acquisitions of yield accretive industrial properties in the second half of 2016.

4 Based on caveats lodged from REALIS and accurate as at 25 January 2017

600

550

500

450

400

350

300

250

200

150

100

Ave

rage

pri

ce (

S$

psf)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

39



Exhibit 4-7: Selected Major Private Warehouse Investment Sales in 2016

Property Location Tenure PurchaserGFAsq ft

Price(S$)

Q1 2016

Tuas Techpark Tech Park CrescentLH-60 years wef 18 Aug

1993N.A. N.A. 12,120,000

11 Gul Crescent 11 Gul Crescent Balance lease

of 25 years from 2016

JTC N.A. 20,498,640

215 Pandan Loop

215 Pandan Loop Not available JTC 90,762 12,779,000

Q2 2016

23 Tuas Avenue 10

23 Tuas Avenue 10LH 30 + 29

years wef 1 Nov 1997

Reliance Products Pte

Ltd102,311 16,500,000

Q4 2016

6 Chin Bee Avenue

6 Chin Bee Avenue LH-30

years wef 25 Oct 2013

Viva Industrial

Trust324,166 87,300,000

218 Pandan Loop

218 Pandan LoopLH 30 + 30

years wef 16 Sep 1989

X Properties Inc Pte Ltd.

50,374 14,800,000

72 Eunos Avenue 7

72 Eunos Avenue 7LH 30

years wef 1 Jan 2011

Sabana REIT

67,977 20,000,000

47 Changi South Avenue 2

47 Changi South Avenue 2

LH 30 + 30 years wef

16 Nov 1996

Sabana REIT

91,573 23,000,000

Cache Changi Districentre 3

Changi North WayBalance lease

of 17 years from 2016

Agility International

Logistics177,000 25,500,000

Notes: To be considered as private investment sales under Knight Frank Research definition, it must fulfil either one of the following pre-requisite:-• Investment transactions should comprise an entire building or property with a total worth of S$10 million and above; OR• Any bulk sales within a development which amounts to S$10 million or more*Figures stated are Net Lettable Areas


40



4.6 Outlook

Warehousing sector likely to support growth in industrial property demand

Benefitting from the growing e-commerce landscape, the warehousing and logistics sector is projected to see continual and stable growth in demand over the next two to three years. Segments such as self-storage facilities for households and businesses, as well as specialized cold room warehousing facilities, could be the outperformers in this property segment along with evolution in living spaces, business operating models and the growth of the food & beverage industry.

Against the backdrop of subdued global trade movement, modest economic growth and the prospects of weaker consumption by both households and businesses, the demand for warehousing space could soften in the short term next year. The large injection of 11.4 million sq ft of new warehouse spaces in end-2016 and 2017 is envisaged to moderate occupancy and rental performance. Rental movement of warehouse space is projected to decline by -8 to -10 per cent y-o-y in Q4 2016, with a further -8 to -6 per cent in Q4 2017.

5 LIMITING CONDITIONS OF THIS REPORT

This Report is subject to the following limiting conditions:

(a) Knight Frank’s responsibility in connection with this Report is limited to Shari’ah Compliant Industrial Real Estate Investment Trust, i.e. the Client to whom the Report is addressed.

(b) It disclaims all responsibility and will accept no liability to any other party.

(c) The Report was prepared strictly in accordance with the terms and for the purpose expressed therein and is to be utilized for such purpose only.

(d) Reproduction of this Report in any manner whatsoever in whole or in part or any reference to it in any published document, circular or statement without the Knight Frank’s prior written approval of the form and context in which it may appear is prohibited.

(e) References to any authority requirements and incentive schemes are made according to publicly available sources as at the submission date of this Report. Technical and legal advice ought to be sought to obtain a fuller understanding of the requirements involved.

41


(f) Projections or forecasts in the course of the study are made to the best of the Knight Frank’s judgment. However, Knight Frank’s disclaims any liability for these projections or forecasts as they pertain to future market conditions, which may change due to unforeseen circumstances.

(g) Knight Frank is not obliged to give testimony or to appear in Court with regard to this Report, unless specific arrangement has been made there for.

(h) The statements, information and opinions expressed or provided are intended only as a guide to some of the important considerations that relate to the property prices. Neither Knight Frank nor any person involved in the preparation of this Report give any warranties as to the contents nor accept any contractual, tortuous or other form of liability for any consequences, loss or damage which may arise as a result of any person acting upon or using the statements, information or opinions in the Report.


42


Property PortfolioAs at 31 December 2016

08 33 & 35 Penjuru Lane09 18 Gul Drive

01 151 Lorong Chuan02 8 Commonwealth

Lane03 9 Tai Seng Drive04 15 Jalan Kilang Barat05 1 Tuas Avenue 406 23 Serangoon North Avenue 507 508 Chai Chee Lane

10 34 Penjuru Lane11 51 Penjuru Road12 26 Loyang Drive13 218 Pandan Loop1

14 3A Joo Koon Circle15 2 Toh Tuck Link16 10 Changi South

Street 2

17 123 Genting Lane18 30 & 32 Tuas

Avenue 819 39 Ubi Road 120 21 Joo Koon Crescent21 6 Woodlands Loop

CHEMICAL WAREHOUSE & LOGISTICS

WAREHOUSE & LOGISTICS

GENERAL INDUSTRIAL

HIGH-TECH INDUSTRIAL

Our properties are diversified into four industrial segments across Singapore, close to expressways and public transportation.

6

1

21

12

16

3

71917

2

4

18

5

20

14

9

15

13

108

11

1 SGX announcement on proposed divestment was made on 5 December 2016.

43


Purchase Consideration (S$ million)

305.9Latest Valuation(As at 31 December 2016) (S$ million)

316.0Gross Rental Income for FY 2016 (S$ million)

23.0

Occupancy Rate1 (%)

87.5Land Lease Expiry

2055 45 yrs with effect from (“wef”) 26 Nov 2010

GFA (sq ft)

810,710

151 LORONG CHUANNew Tech Park, Singapore 556741

A six-storey industrial building with a ground level carpark




4.6

Occupancy Rate (%)


2059 30 + 23 yrs wef 1 Feb 2006

GFA (sq ft)

161,815

8 COMMONWEALTH LANE Singapore 149555

A four-storey industrial building with a six-storey annex

Property Portfolio

1 Occupancy rates stated from pages 44 to 54 are as at 31 December 2016.

44


Property Portfolio




3.1

Occupancy Rate (%)


2055 30 + 30 yrs wef 1 Jun 1995

GFA (sq ft)

218,905

9 TAI SENG DRIVEGeo-Tele Centre, Singapore 535227

A six-storey industrial building with a basement carpark




1.8

Occupancy Rate (%)


2060 99 yrs wef 1 Jan 1962

GFA (sq ft)

73,928

15 JALAN KILANG BARATFrontech Centre, Singapore 159357

An eight-storey industrial building with a multi-storey carpark at Levels Two & Three

45





2.7

Occupancy Rate (%)


2047 30 + 21 yrs 4 mths wef 1 Jan 1996

GFA (sq ft)

160,361

Proposed part three-/part six-storey industrial building currently under additions & alterations works




1.9

Occupancy Rate (%)


2056 30 + 20 yrs 15 days wef 16 Sep 2006

GFA (sq ft)

159,384

23 SERANGOON NORTH AVENUE 5BTH Centre, Singapore 554530

A five-storey industrial building with a mezzanine level

1 TUAS AVENUE 4 Singapore 639382

Property Portfolio

46


Property Portfolio

508 CHAI CHEE LANESingapore 469032

A seven-storey industrial building with two basements

33 & 35 PENJURU LANEFreight Links Express Logisticpark,Singapore 609200/609202

Comprising three buildings, including a single storey warehouse with mezzanine floor, a four-storey warehouse and a part single-storey/part three-storey warehouse with a basement


67.2*

Latest Valuation(As at 31 December 2016) (S$ million)


5.4

Occupancy Rate (%)


2060 30 + 29 yrs wef 16 Apr 2001

GFA (sq ft)

319,718




4.7

Occupancy Rate (%)


2049 30 + 31 yrs wef 16 Feb 1988

GFA (sq ft)

286,192

* Includes land premium of approximately S$7.5 million paid to JTC.

47


A part two-/part four-storey warehouse

34 PENJURU LANEPenjuru Logistics Hub, Singapore 609201

A five-storey warehouse with ancillary offices

18 GUL DRIVE Singapore 629468




2.2

Occupancy Rate (%)


2038 13 yrs 10 mths 12 days + 20 yrs wef 1 Nov 2004

GFA (sq ft)

132,878




4.8

Occupancy Rate (%)


2032 30 yrs wef 16 Aug 2002

GFA (sq ft)

414,270

Property Portfolio

48


Property Portfolio

51 PENJURU ROADFreight Links Express Logisticentre,Singapore 609143

A part single/part three-/part four-storey warehouse building with mezzanine floor

26 LOYANG DRIVESingapore 508970

A single-storey warehouse building with mezzanine floors




3.2

Occupancy Rate (%)


2054 30 + 30 yrs wef 1 Jan 1995

GFA (sq ft)

246,376

Purchase Considerationt (S$ million)



2.3

Occupancy Rate (%)


2053 30 + 18 yrs wef 1 Jan 2006

GFA (sq ft)

149,166

49


A single-storey cold room warehouse with mezzanine floor and a two-storey office building

3A JOO KOON CIRCLESingapore 629033

A two-storey warehouse building with mezzanine floor and a part three-/part four-storey factory building

218 PANDAN LOOPSingapore 128408




0.0*

Occupancy Rate (%)

0.0*

Land Lease Expiry

2049 30 + 30 yrs wef 16 Sept 1989

GFA (sq ft)

50,374




3.0

Occupancy Rate (%)


2047 30 + 30 yrs wef 1 Aug 1987

GFA (sq ft)

217,899

Property Portfolio

* Currently vacant, divestment (announced on 5 December 2016) pending JTC approval.

50


Property Portfolio

2 TOH TUCK LINKSingapore 596225

A part four-/part six-storey warehousebuilding with a basement carpark

10 CHANGI SOUTH STREET 2 Singapore 486596

A part single/part six-storey warehouse building with ancillary offices




2.5

Occupancy Rate (%)


2056 30 + 30 yrs wef 16 Dec 1996

GFA (sq ft)

181,705


54.2*

Latest Valuation(As at 31 December 2016) (S$ million)


4.1

Occupancy Rate (%)


2051 30 + 27 yrs wef 1 Oct 1994

GFA (sq ft)

189,609* Includes land premium of approximately S$3.8 million paid to JTC.

51


An eight-storey industrial building with ancillary offices

30 & 32 TUAS AVENUE 8Singapore 639246/639247

Comprising two original “E8” JTC standard factories with an adjoining four-storey factory with ancillary offices

123 GENTING LANEYenom Industrial Building, Singapore 349574




2.0

Occupancy Rate (%)


2041 60 yrs wef 1 Sept 1981

GFA (sq ft)

158,907




2.5

Occupancy Rate (%)


2056 30 + 30 yrs wef 1 Sept 1996

GFA (sq ft)

158,846

Property Portfolio

52


Property Portfolio

39 UBI ROAD 1Singapore 408695

An eight-storey industrial building with ancillary offices

21 JOO KOON CRESCENT Singapore 629026

A three-storey industrial building with ancillary offices




2.3

Occupancy Rate (%)


2051 30 + 30 yrs wef 1 Jan 1992

GFA (sq ft)

135,513




1.4

Occupancy Rate (%)


2054 30 + 30 yrs wef 16 Feb 1994

GFA (sq ft)

99,575

53


A three-storey industrial building with ancillary office and mezzanine extension

6 WOODLANDS LOOPSingapore 738346




1.3

Occupancy Rate (%)


2054 30 + 30 yrs wef 16 Sept 1994

GFA (sq ft)

77,544

Property Portfolio

54


Operations Review

During the financial year under review, Sabana REIT saw the expiry of four master-tenanted properties, of which three were Sponsor-related properties (33 & 35 Penjuru Lane, 18 Gul Drive and 51 Penjuru Road). The three Sponsor-related properties were renewed for a one-year term each, following the exercise of option to renew under the terms of the respective master leases. In entering into the master leases, the Manager had negotiated with the Sponsor at arm’s length and ensured that the rental rates were comparable to and in line with the then prevailing market. The remaining property, 39 Ubi Road 1, was converted to a multi-tenanted building.

On 5 December 2016, we announced the proposed divestment of 218 Pandan Loop to X Properties Inc Pte Ltd. for a sale consideration of S$14.8 million. The sale price is above the purchase consideration of S$13.5 million and above the $13 million desktop valuation performed in mid-2016. The divestment is also in line with the Manager’s strategy to divest non-core and under-performing assets to recycle Sabana REIT’s capital into higher yielding assets, so as to optimise portfolio returns for Unitholders.

In FY 2016, we achieved across the portfolio a total of 631 lease transactions (renewals and new leases). As at 31 December 2016, the portfolio’s occupancy was 87.2%, with 10 master-tenanted properties fully occupied and 10 multi-tenanted properties with occupancy rate of 80.1%. The weighted average lease term to expiry (“WALE”) for the new leases (including renewals), by gross rental income, was 21.1 months. These new leases contributed to 7.9% of the year’s gross rental income. The WALE for the sub-tenancies and master tenancies by gross rental income as at 31 December 2016 were 31.4 months and 2.9 years respectively.

LEASE TYPE BY NLA (%) (As at 31 December 2016)

Master Leases

40.7Multi-tenanted

59.3

For the financial year ended 31 December 2016, Sabana REIT held a portfolio of 21 industrial properties in Singapore with a total net lettable area (“NLA”) of 3,605,294 sq ft. Master-tenanted and multi-tenanted properties accounted for 40.7% and 59.3% of the portfolio’s NLA respectively.

1 Excluding 200 Pandan Loop which was divested on 14 March 2016.

55


1 Source: https://www.lta.gov.sg/content/ltaweb/en/public-transport/projects/downtown-line/overview.html. Land Transport Authority. 31 January 2017.

PROPOSED ACQUISITIONS IN FY 2016We announced the proposed acquisitions of 72 Eunos Avenue 7 (“Eunos Ave 7 Property”), 107 Eunos Avenue 3 (“Eunos Avenue 3 Property”) and 47 Changi South Avenue 2 (“Changi South Property”) on 8 December 2016, 14 December 2016 and 15 December 2016 respectively. The proposed acquisition of the Changi South Property is subject to Unitholders’ approval.

The Eunos Avenue 7 Property was independently valued by Knight Frank Pte Ltd at S$20.0 million, using the capitalisation approach and the discounted cash flow analysis and the REIT will pay the same purchase consideration to the vendor Singapore Handicrafts Pte Ltd. The Eunos Avenue 3 Property was independently valued at S$34.5 million by Savills Valuation And Professional Services (S) Pte Ltd, using the income capitalisation method, the discounted cash flow analysis and direct comparison method. The REIT will pay the same purchase consideration to the vendor General Cars Fleet Management Pte Ltd. The Changi South Property was independently valued by Savills Valuation And Professional Services (S) Pte Ltd at S$23.0 million using the direct comparison, income capitalisation and the discounted cash flow analysis and by Knight Frank Pte Ltd at S$23.0 million using the capitalisation approach and the discounted cash flow analysis. The REIT will pay the same purchase consideration to the vendor Freight Links Properties Pte Ltd.

The Eunos Avenue 7 and Eunos Avenue 3 properties are located within the Eunos Industrial Estate and are accessible via the Pan Island Expressway. They are in close proximity to both Paya Lebar MRT station and Eunos MRT station on the East-West Line.

The Changi South Property is located within the Changi South Industrial Estate and is accessible via the East Coast Parkway Expressway, Pan Island Expressway and Tampines Expressway. This property is well served by public transport, and in close proximity to the Expo MRT station on the East-West Line and will also be serving the Downtown Line upon the completion of Phase 3 of the Downtown Line, expected in 20171.

As at 31 December 2016, the value of the Trust’s portfolio of 21 properties was approximately S$1.0 billion.

Operations Review

Total Portfolio Multi-tenantedProperties

Master-tenantedProperties

87.280.1

100.0

OCCUPANCY LEVELS BY TENANCY TYPES (%) (As at 31 December 2016)

56


LEASE MANAGEMENT FOR FY 2017Five master leases2 are expected to expire in 2017. Three of these are Sponsor-related properties3. We are currently working with the respective master tenants to renew the leases.

Operations Review

2 33 & 35 Penjuru Lane, 18 Gul Drive, 51 Penjuru Road, 21 Joo Koon Crescent and 6 Woodlands Loop.3 33 & 35 Penjuru Lane, 18 Gul Drive and 51 Penjuru Road.

MASTER LEASE EXPIRY BY GROSS RENTAL INCOME (%)(As at 31 December 2016)

2016 2017 2018 2019 2020 Beyond 2020

45.7

17.4 10.8

26.1

2016 2017 2018 2019 2020 Beyond 2020

25.321.5

25.222.4

4.90.7

MULTI-TENANTED LEASE EXPIRY BY GROSS RENTAL INCOME (%) (As at 31 December 2016)

2016 2017 2018 2019 2020 Beyond 2020

Master Lease Multi-tenanted

14.4

22.411.8

7.6 6.5

10.7

4.51.0

11.9

9.2

LEASE EXPIRY BY NLA (%) (As at 31 December 2016)

– –

57


INDEPENDENT ASSET VALUATION COMPARISONS

Valuation as at 31 December 2016

(S$’000)

Valuation as at 31 December 2015

(S$’000)

HIGH-TECH INDUSTRIAL

151 Lorong Chuan 316,000 339,500

8 Commonwealth Lane 57,000 67,500

9 Tai Seng Drive 41,000 45,300

15 Jalan Kilang Barat 23,000 24,000

1 Tuas Avenue 4 32,400 32,200

23 Serangoon North Avenue 5 41,000 48,100

508 Chai Chee Lane 56,800 60,900

CHEMICAL WAREHOUSE & LOGISTICS

33 & 35 Penjuru Lane 60,000 66,400

18 Gul Drive 24,500 27,300

WAREHOUSE & LOGISTICS

34 Penjuru Lane 40,700 46,400

51 Penjuru Road 46,800 47,800

26 Loyang Drive 24,700 28,100

218 Pandan Loop1 13,000 13,600

3A Joo Koon Circle 39,000 41,000

2 Toh Tuck Link 32,300 35,100

10 Changi South Street 2 52,100 52,800

GENERAL INDUSTRIAL

123 Genting Lane 18,200 18,700

30 & 32 Tuas Avenue 8 29,000 29,300

39 Ubi Road 1 23,000 33,200

21 Joo Koon Crescent 19,000 18,700

6 Woodlands Loop 14,100 14,300

TOTAL 1,003,6002 1,090,200

1 As at 31 December 2016, the property has been reclassified to investment property held for divestment, in accordance with FRS 105.2 The diminution in the value of the portfolio is reflective of the market conditions as at the date of valuation.

Operations Review

58


Operations Review

TOP TEN TENANTSVibrant Group Limited, Sabana REIT’s sponsor, remains our largest tenant, contributing 12.7% of our total gross rental income for FY 2016. In total, the top ten tenants accounted for approximately 46.6% of Sabana REIT’s total gross rental income during the financial year under review. The tenant mix of Sabana REIT’s portfolio continues to remain diversified. As at 31 December 2016, there are a total of 114 sub-tenants in the portfolio. Tenant concentration risk is low as these tenants comprise of small medium-sized enterprises and multinational companies, are spread across different trades and industries.

TOP TEN TENANTS BY GROSS RENTAL INCOME FOR FY 2016

No. Tenant PropertyPercentage of Gross Rental Income (%)

1Subsidiaries of Vibrant Group Limited

33 & 35 Penjuru Lane,Freight Links Express Logisticpark, Singapore 609200/609202

12.718 Gul Drive, Singapore 629468

51 Penjuru Road, Freight Links Express Logisticentre, Singapore 609143

2 Advanced Micro Devices (Singapore) Pte Ltd

508 Chai Chee Lane,Singapore 469032

5.5

3 Adviva Distribution Pte. Ltd. 10 Changi South Street 2,Singapore 486596

5.2

4 Wincor Nixdorf Pte Ltd 151 Lorong Chuan,New Tech Park,Singapore 556741

4.7

5 Avnet Asia Pte Ltd

26 Loyang Drive, Singapore 508970

4.4151 Lorong Chuan,New Tech Park,Singapore 556741

6 ST Synthesis Pte Ltd 3A Joo Koon Circle, Singapore 629033

3.8

7 ASM Advanced Packaging Materials Pte. Ltd.

30 & 32 Tuas Avenue 8, Singapore 639246/639247

3.1

8 Ascend Group Pte. Ltd. 39 Ubi Road 1, Singapore 408695

2.8

9 Cotton On Singapore Pte. Ltd.

34 Penjuru Lane, Penjuru Logistics HubSingapore 609201

2.6

10 Epsilon Telecommunications (SP) Pte. Ltd.

151 Lorong Chuan,New Tech Park,Singapore 556741

1.8

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DIVERSITY IN PROPERTY SEGMENTS, TRADE SECTORS AND LOCATIONSSabana REIT’s well-diversified portfolio is spread across four asset types: High-tech Industrial, Chemical Warehouse and Logistics, Warehouse and Logistics and General Industrial. The High-tech Industrial segment remained the largest in the Trust’s portfolio, accounting for 40.9% of total NLA and generated 58.8% of Sabana REIT’s gross revenue as at 31 December 2016. This was followed by Warehouse and Logistics, General Industrial and lastly, Chemical Warehouse and Logistics.

The tenants in Sabana REIT’s portfolio come from many trade sectors and industries. As at 31 December 2016, the largest sector was the Electronics segment at 14.0%, followed by Information Technology at 12.9%.

4 Refers to sub-tenants and direct tenants.

Operations Review

Logistics 9.2R&D 1.1

Info Technology 12.9

Storage 6.3

Telecommunication & Data Warehousing 10.4

Fashion & Apparel 7.514.0 Electronics

1.4 General Manufacturing Industries1.1 F&B

8.2 Chemical

2.3 Construction & Utilities

6.7 Engineering

3.7 Healthcare

2.4 Printing

12.8 Others

SUB-TENANTS’ INDUSTRY DIVERSIFICATION BY NLA (%) (AS AT 31 DECEMBER 2016)4

ASSET BREAKDOWN BY NLA (%) (As at 31 December 2016)

GROSS REVENUE BY ASSET TYPES (%) (As at 31 December 2016)

40.9

35.0

9.2

14.9

58.8

23.1

7.7

10.4

High-tech Industrial Chemical Warehouse & Logistics Warehouse & Logistics General Industrial

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Sabana REIT’s properties are conveniently situated near major transport routes and are easily accessible by public transport (see page 43 for property locations). They sit on well-distributed relatively long underlying land leases, with weighted average lease expiry of 34.6 years by GFA.

5 Weighted by GFA.

LOOKING AHEAD Despite the subdued outlook for the global economy and the Singapore industrial property market, the Manager will continue to stay proactive in managing the lease expiry profile and maintain rigorous marketing and leasing efforts to increase the Trust’s portfolio occupancy. As for the expiry of five master leases in FY 2017, we are currently working with the respective master tenants to renew the leases. The Sponsor remains supportive and intends to renew the three master leases at the Sabana REIT properties it currently occupies at prevailing market rents in line with those of similar properties in similar locations.

In addition, the Manager remains very focused on actively managing the Trust’s cost and is committed to enhancing the Trust’s portfolio to generate stable income streams and deliver reasonable returns to the Unitholders. We will also adopt a cautious approach when evaluating appropriate acquisition opportunities, always placing Unitholders’ interests as the highest priority.

Operations Review

PERCENTAGE OF UNEXPIRED LAND LEASE TERM BY GFA (%) (As at 31 December 2016)5

2032 - 2036 2037 - 2041 2042 - 2046 2047 - 2051 2052 - 2056 2057 - 2061 Beyond 2061

9.46.6

20.5

50.8

12.7

––

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Board of Directors

Board of Directors

MR STEVEN LIM KOK HOONGChairman and Independent Non-executive Director

Mr Lim was appointed as the Chairman and Independent Non-executive Director of the Manager on 1 November 2010 and was last re-elected on 23 September 2016. He is a member of the Audit Committee and the Nominating and Remuneration Committee.

In addition to his appointment at the Manager, Mr Lim sits as an independent director on the boards of several publicly listed companies in Singapore.

For over 30 years in his public accountancy career, Mr Lim held top positions in a number of well-known accounting firms. For example, at Ernst & Young in Singapore, he served as Audit Partner for various clients and assisted in managing the firm. He also worked for 12 years as the Managing Partner at Arthur Andersen.

Mr Lim holds a Bachelor of Commerce degree from the University of Western Australia. He is a member of the Institute of Chartered Accountants in Australia and the Institute of Singapore Chartered Accountants.

Present Directorships• B2C Network Pte Ltd• Genting Singapore PLC• Global Logistic Properties Limited• Grande Rue Investment Pte Ltd• Parkway Trust Management Limited

(Chairman)• Marchwood Laboratory Services Pte Ltd• Sabana Real Estate Investment Management

Pte. Ltd. (Chairman)• Visionary Investment Holdings Pte Ltd• YSL Starville Investment Holdings Pte Ltd

MR YONG KOK HOONIndependent Non-executive Director

Mr Yong was appointed as an Independent Non-executive Director of the Manager on 1 November 2010 and was last re-elected on 23 September 2016. He is also the Chairman of the Audit Committee and the Nominating and Remuneration Committee.

Mr Yong was the Managing Director of InnoTek Limited, a technology focused group of companies listed on the main board of the SGX-ST. He was also the Chairman and CEO of Mansfield Manufacturing Co, Limited, a Hong Kong-incorporated precision engineering group with manufacturing facilities in Donguan, Suzhou, Dalian and Wuhan, in the People’s Republic of China and operations in Netherlands and Czech Republic in Europe. He retired from his active roles in May 2014.

Mr Yong is a Chartered Accountant (Singapore) and a Fellow of the Association of Chartered Certified Accountants (UK). He started his accounting and auditing career with KPMG LLP and subsequently spent more than 10 years in Ernst & Young until 1994; and thereafter, as Partner in Moore Stephens, an international accounting firm. In his foray into the corporate world, Mr Yong took on the position of Group Financial Controller at QAF Ltd, a SGX-ST main board listed FMCG group between 1996 and 1999. Since 1999, Mr Yong had been with InnoTek Limited, and held key leadership roles which span over 15 years, serving initially as Chief Financial Officer (“CFO”), Executive Director and subsequently as Managing Director.

With a robust background in accounting, auditing, finance and, advisory services, Mr Yong played pivotal roles in M&A transactions, strategic

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investments and corporate functions in InnoTek Limited to unlock shareholder value. He was also the key driver for its strategic direction, operational excellence, corporate governance compliance and risk management. Under his leadership, InnoTek Limited won the investor choice, “Best Corporate Governance award (small cap, <S$300 million)” for two consecutive years in 2012 and 2013.

Mr Yong also served as a member of the financial statements review committee and was a member of the China Committee of the Institute of Singapore Chartered Accountants. He holds a Master of Business Administration from the International Management Centre, Europe.

Present Directorship• Sabana Real Estate Investment Management

Pte. Ltd.

MR KEVIN XAYARAJCo-founder, Chief Executive Officer and Executive Director

Mr Xayaraj is the Co-founder, CEO and Executive Director of the Manager since 15 March 2010 and was last re-elected on 31 August 2015. He has more than 25 years of experience in real estate investment, development and asset management in many property markets.

Before joining the Manager, Mr Xayaraj was the Director, Real Estate Investments of AACP from October 2009 to August 2010. From January 2009 to August 2009, Mr Xayaraj worked as Senior Manager, Marketing at Cambridge Industrial Property Management Pte. Ltd.

Mr Xayaraj was with Cambridge Industrial Trust Management Limited from December 2005

to December 2008 as Assistant Vice President (Investment). From January 2004 to December 2005, he was involved in the business development and asset management at Ascendas Land (Singapore) Pte Ltd.

Mr Xayaraj was Vice President, Research and Finance at Pacific Star Asset Management Pte. Ltd. from January 2003 to December 2003 and was Assistant Manager, Project & Financial Analysis at Pacific Star Property Management Pte Ltd from July 2002 to December 2002. Mr Xayaraj also held other positions such as Senior Manager (Research) with Jones Lang LaSalle Property Consultants Pte Ltd from January 2002 to April 2002, Equities Research Analyst with OUB Securities Pte Ltd from July 1999 to March 2001, UOB Investment Research Pte Ltd from December 1997 to July 1999 and Tsang & Ong Research (Pte) Ltd from January 1997 to December 1997, and Property Analyst/Valuer at Stewart, Young, Hillesheim & Atlin Ltd in Toronto (Canada) from February 1988 to December 1994.

Mr Xayaraj is a recipient of Asia Pacific Entrepreneurship Award 2015 Singapore under “Most Promising” category, presented by Enterprise Asia.

Mr Xayaraj holds a Bachelor of Applied Science (Honours) degree from the University of Windsor and a Master of Business Administration from the Imperial College, University of London.

Present Directorships• Blackwood Investment Pte. Ltd. • Sabana Investment Partners Pte. Ltd. • Sabana Property Management Pte. Ltd. • Sabana Real Estate Investment Management

Pte. Ltd.

Board of Directors

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Board of Directors

MR HENRY CHUA TIONG HOCKNon-executive Director

Mr Chua was appointed as Non-executive Director of the Manager on 1 November 2010 and was last re-elected on 18 July 2014. He is a member of the Nominating and Remuneration Committee.

For more than 20 years, Mr Chua has worked at Vibrant Group Limited, the Sponsor of Sabana REIT. Vibrant Group Limited is a leading logistics, real estate and financial services group. He has served in numerous roles in management and operations at Vibrant Group over the years. Mr Chua is currently Executive Director and Chief Corporate Development Officer of Vibrant Group Limited and is responsible for corporate development, investment and properties within the Group. He is concurrently a non-executive director of Freight Management Holdings Berhad, an associate company of Vibrant Group Limited, which is listed on Bursa Malaysia. Mr Chua also holds the position of Executive Director in a number of other subsidiaries in Vibrant Group located in Singapore and overseas.

Mr Chua holds a Bachelor of Arts from the University of Singapore, a Diploma in Personnel Management from the Singapore Institute of Management and Singapore Institute of Personnel Management and a Diploma in Business Administration from the National University of Singapore.

Present Directorships• Busan Cross Dock Co., Ltd• Chemode Global Pte Ltd• Crystal Freight Services Distripark Pte Ltd• Crystal Freight Services Pte Ltd• Crystal Shipping Line (H.K) Limited

• Far East Continental Shipping Line Limited• FLE Shipping Line Pte Ltd• Flex Integrated Marketing Pte Ltd• Freight Link M & S (H.K) Limited• Freight Links Express (M) Sdn Bhd• Freight Links Express (Penang) Sdn Bhd• Freight Links Express (Thailand) Co., Ltd• Freight Links Express Air Systems Pte Ltd• Freight Links Express Airfreight Pte Ltd• Freight Links Express Archivers Pte Ltd• Freight Links Express Districentre Pte Ltd• Freight Links Express Distrihub Pte Ltd• Freight Links Express Distripark Pte Ltd• Freight Links E-Logistics Technopark Pte Ltd• Freight Links Express International Ltd• Freight Links Express Logisticentre Pte Ltd• Freight Links Express Logisticpark Pte Ltd• Freight Links Express Pte Ltd• Freight Links Fabpark Pte. Ltd.• Freight Links Logistics Pte. Ltd.• Freight Links Properties Pte. Ltd.• Freight Management Holdings Berhad• Fudao Petrochemicals Group Pte. Ltd.• Harbour Investors, Inc• Lee Thong Hung Trading & Transport Sdn

Bhd• LTH Distripark Pte Ltd• LTH Logistics (Malaysia) Sdn Bhd• LTH Logistics (Singapore) Pte Ltd• Piow Hong Pte Ltd• Sabana Real Estate Investment Management

Pte. Ltd.• Sabana Property Management Pte. Ltd.• Sabana Investment Partners Pte. Ltd.• Singapore Enterprises Private Limited• Sinmachem Sdn Bhd• Vibrant Group Limited

* The above are private subsidiaries of SGX-listed Vibrant Group Limited.

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MS NG SHIN EIN1 Non-executive Director

Ms Ng Shin Ein was appointed as Non-executive Director of the Manager on 1 November 2010 and was re-elected on 31 August 2015. She is a member of the Audit Committee.

Ms Ng Shin Ein is the Managing Partner of Gryphus Capital, an investment firm. Ms Ng leads a global network of family offices and strategic investors in private equity investments. She is actively engaged in strategic and business development of portfolio companies.

Prior to this, Ms Ng spent a number of years at the Singapore Exchange, where she was responsible for developing Singapore’s capital market and bringing foreign companies to list in Singapore. Additionally, she was part of the Singapore Exchange’s IPO Approval Committee, where she contributed industry perspectives and also acted as a conduit between the marketplace and regulators.

Admitted as an advocate and solicitor of the Singapore Supreme Court, Ms Ng started her career as a corporate lawyer in Messrs Lee & Lee. Whilst at Lee & Lee, she advised clients on joint ventures, mergers & acquisitions and fund raising exercises.

Ms Ng is on the Board of NTUC Fairprice. Additionally, she serves on the boards of Yanlord Land Ltd, First Resources Ltd and UPP Holdings, companies listed on the Mainboard of Singapore Exchange. Ms Ng was also an adjunct research fellow at the National University of Singapore, where she focused on her area of interest, social enterprise and corporate philanthropy.

Present Directorships• Blue Ocean Associates Pte. Ltd.• First Resources Limited• NTUC Fairprice Co-operative Ltd.• Sabana Real Estate Investment Management

Pte. Ltd.• UPP Holdings Ltd• Working Capital Partners, Ltd• Yanlord Land Group Limited

Board of Directors

1 Announcement on Ms Ng’s resignation was made on 27 February 2017.

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Management Team

from April 2007 to August 2007 and Manager of Magnecomp International Limited from April 2004 to April 2007, where he handled media, investor and analyst relations for the company. In all, Mr Tay has more than a decade of experience in the field of investor relations. Before his foray into the investor relations field, Mr Tay worked as an operations executive for the People’s Action Party at its headquarters from January 2000 to April 2004.

Mr Tay serves as President of Gulf Asia Shari’ah Compliant Investment Association, a non-profit organisation he founded with a group of Islamic Finance professionals. This organisation seeks to promote awareness and understanding of Islamic Finance and to forge stronger synergies between the Gulf and Asia on Islamic Finance.

Mr Tay holds a Bachelor of Commerce degree in Management from the University of Western Sydney and a Master of Business Systems degree from Monash University.

1. MR KEVIN XAYARAJCo-founder, CEO and Executive Director

Please refer to the description under the section on “Board of Directors”, page 64)

2. MR BOBBY TAY CHIEW SHENGCo-founder, Chief Strategy Officer and Head of Investor Relations

Mr Tay has been serving as the Chief Strategy Officer and Head of Investor Relations of the Manager since the listing of Sabana REIT in November 2010.

Prior to joining the Manager, Mr Tay was Director, Business Development at AACP. He worked with Cambridge Industrial Trust Management Limited as the manager of the investor relations department from August 2007 to September 2009. Mr Tay was Manager of Investor Relations at Aztech Group Ltd

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3. MR AW WEI BEENChief Operating Officer and Head of Asset Management

Mr Aw was appointed as the Chief Operating Officer and Head of Asset Management of the Manager since the listing of Sabana REIT in November 2010. He has worked in the real estate industry for approximately 21 years.

Prior to joining the Manager in 2010, Mr Aw was Head of Asset Management at AACP. This was preceded by his role at the Agency for Science, Technology and Research (“A*STAR”), where he served as Head, Infrastructure Planning and Facilities Management. At A*STAR, Mr Aw was responsible for the development planning of a business park cum high-specification scientific facility.

From 2007 to 2009, Mr Aw served as a Senior Manager for Investment at Cambridge Industrial Trust Management Limited. From 2005 to 2007, Mr Aw was with Jurong Consultants Pte Ltd, a wholly-owned subsidiary of JTC Corporation, where he was the principal planner in the planning department. The role saw him leading and co-leading consultancy projects out of Singapore, in master planning of industrial parks and related areas.

Mr Aw began his career in 1995 with JTC, a statutory board that controls the development and marketing of major industrial estates in Singapore. There, he built up his experience in lease management, land and building development and the marketing of industrial facilities. Mr Aw was at JTC from May 1995 until February 2005 and held the position of Manager before he left the company.

Mr Aw graduated with a Bachelor of Science (Honours) degree in Estate Management from the National University of Singapore and holds a Master of Science in Real Estate from the National University of Singapore.

4. MS TAN CHIEW KIANChief Financial Officer

Ms Tan joined the Manager as CFO in April 2011. She works closely with the CEO and the management team to formulate strategic plans for Sabana REIT. Prior to joining the Manager, Ms Tan held key accounting and finance positions in a number of listed companies.

From February 2008 to March 2011, Ms Tan was the Chief Financial Officer of Singapore Medical Group Limited, where she was responsible for the Group’s finance, tax, treasury, audit, investments and other matters that relate to the Group’s listing on SGX-ST. From 2006 to 2008, she was Chief Financial Officer of Toll Logistics (Asia) Ltd (formerly known as Sembawang Kimtrans Ltd), Southeast Asia’s leading integrated logistics service provider, where she held a similar portfolio. Ms Tan started her accounting career at JTC as Accountant and took on the role as Finance Manager for CapitaLand Commercial Limited from 2001 to 2005.

Ms Tan holds a Master of Business Administration (Accountancy) from Nanyang Technological University and a CIMA Diploma in Islamic Finance. She is a Chartered Accountant and Accredited Tax Practitioner (Income Tax) of Singapore, and member of the Institute of Singapore Chartered Accountants and Singapore Institute of Accredited Tax Professionals Limited.

Management Team

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Corporate Social Responsibility

Sabana REIT is a responsible corporate citizen. Community engagement continues to be one of its core values. We remain committed to engaging the community through various corporate social responsibility activities. Our community efforts involving the voluntary contribution of time, efforts and resources by our staff align with our value system which encompasses reaching out to the less fortunate in our society.

1Q 2016

Organisation: Lien AidSabana REIT’s contributed its non‐Shari’ah income for this quarter amounting to S$43,221 to Lien Aid, a non-profit organisation that seeks to make clean water and proper sanitation more accessible and affordable for poor rural communities in Asia. The amount was utilised to set up a centralised water supply system which provides clean water to residents in about 380 households in the Hunan province. It was also utilised to support Lien Aid’s health and hygiene awareness campaigns held in that community.

VALUE IN OUR COMMUNITYCREATING

During the year under review, Sabana REIT continued to help numerous charitable organisations and causes with its non-Shari’ah income. In 2016, Sabana REIT allocated a total of S$111,915 to the following beneficiaries:

(A) SABANA REIT’S NON-SHARI’AH INCOME BENEFICIARIES

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2Q 2016

Organisation: Operation Hope Foundation Sabana REIT’s non‐Shari’ah income of S$15,384 in this quarter was used to fund two on-going projects by Operation Hope Foundation. The first project was their Nepal Earthquake Rebuilding Project which involved the building of rice bag houses for the villagers in the Dhading District, Nepal. The second project was a sponsorship programme, providing bursaries for youth training at their skills training centres in Cambodia. This programme helped rural youths to acquire the necessary skills to find employment.

3Q 2016

Organisation: Mendaki SENSESabana REIT contributed non‐Shari’ah income amounting to S$22,728 in this quarter to Mendaki SENSE, the training arm of Yayasan MENDAKI. The amount would be used for their “Back-to-Work” women programme called “EmpoWOMENt”. This programme was set up to educate and help equip the under-privileged women with the necessary skills to return to the work force. 4Q 2016

Organisation: Singapore Kadayanallur Muslim LeagueSabana REIT’s non‐Shari’ah income of S$30,582 in this quarter was allocated to the Singapore Kadayanallur Muslim League. The amount was utilised to provide relief aid to the victims of Cyclone Vardah which caused much damage in many districts in Chennai on 12 December 2016.

(B) COMMUNITY SERVICE

During the financial year, the Manager’s management team and staff participated in community projects that could make a difference to people from all walks of life in the community.

GIVE BLOOD, SAVE LIVES

Following on the positive responses from our blood donation drives in the past few years, we have decided to reprise the project in October 2016. Close to 100 people signed up to participate in the blood donation drive and almost 75 successful blood donations were received. Our employees contributed significant efforts in areas such as providing administrative and logistics support for the event.

Corporate Social Responsibility

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Corporate Governance Report

INTRODUCTION

The Manager’s main responsibility is to manage the assets and liabilities of the Trust for the benefit of its Unitholders. The Manager sets the strategic direction of the Trust and gives recommendations to HSBC Institutional Trust Services (Singapore) Limited, as trustee of the Trust (the “Trustee”), on the acquisition, divestment and enhancement of the assets of the Trust in accordance with its stated investment strategy. The Manager is also responsible for the risk management of the Trust.

The Manager was appointed in accordance with the terms of the trust deed entered into between the Manager and the Trustee constituting Sabana REIT dated 29 October 2010 (as amended, varied or supplemented from time to time), (collectively the “Trust Deed”). The Trust Deed also outlines certain circumstances under which the Manager can be removed, including by notice given in writing by the Trustee upon the occurrence of certain events, or by a simple majority of Unitholders present and voting at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed.

The Manager and its officers are licensed under the Securities and Futures Act, Chapter 289 (“SFA”) to carry out REIT management activities with effect from 2 November 2010. It holds a Capital Markets Services (“CMS”) Licence issued by the Monetary Authority of Singapore (“MAS”).

The Manager is committed to upholding high standards of corporate governance, which are essential to sustaining the Trust’s business and performance. This report describes the Manager’s corporate governance framework and practices in compliance with the principles and guidelines of the Code of Corporate Governance 2012 (the “2012 Code”). The Manager confirms that it has adhered to the principles and guidelines as set out in the 2012 Code where applicable. Any deviations from the 2012 Code are explained.

BOARD MATTERS

THE BOARD’S CONDUCT OF AFFAIRS

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.

The Board provides entrepreneurial leadership, sets the strategic direction and ensures that the necessary resources are in place for the Manager to meet its objectives. It also sets the values and standards for the Manager and the Trust, to ensure that obligations to its stakeholders are understood and met, with the ultimate aim of safeguarding and enhancing Unitholder’s value.

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As at 31 December 2016, the Board members are:

Independent DirectorsMr Steven Lim Kok Hoong (Chairman)Mr Yong Kok Hoon

Non-executive DirectorsMr Henry Chua Tiong Hock Ms Ng Shin Ein

Executive DirectorMr Kevin Xayaraj (CEO)

The profiles of the Directors (which contain key information of the Directors that the Manager considers to be relevant to Unitholders for the purposes of Guideline 4.7 of the 2012 Code) are set out on pages 63 to 66 of this Annual Report.

The Board provides oversight and assumes overall responsibility for the corporate governance of the Manager, including establishing goals for management and monitoring the achievement of these goals. The Board has established an oversight framework for the Manager and the Trust, including a system of internal controls which enables risks to be assessed and managed.

In order for the Board to efficiently provide oversight, it delegates specific areas of responsibilities to its Board Committees; namely, the Nominating and Remuneration Committee (“NRC”) and Audit Committee (“AC”). Each Board Committee is governed by its respective terms of reference which have been carefully considered and approved by the Board.

The Manager has adopted a framework of delegated authorisations in its Delegation of Authority (“DOA”) approved by the Board. The DOA sets out the level of authorisation and the respective approval limits for a range of transactions, including but not limited to acquisitions, divestments, operating and capital expenditures. Transactions and matters which require the Board’s approval, such as annual budgets, financial statements, funding and investment proposals, opening and closing of bank accounts, are clearly set out in the DOA.

The Board meets at least once every quarter to discuss and review the financial performance of the Trust, including any significant acquisitions and disposals, funding strategy and hedging activities, and to approve the release of the quarterly, half-yearly and full year financial results. Additional meetings are convened as and when warranted by particular circumstances requiring the Board’s attention. The Constitution of the Manager provide for Directors’ participation in meeting by way of telephone or video conferencing or other methods of simultaneous communication by electronic or telegraphic means.

The Manager issues formal letters upon appointment of new Directors, setting out their relevant duties and obligations, to acquaint them with their responsibilities as Directors of the Manager.


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Newly appointed Directors are provided with information relating to the Trust’s business, strategic directions, corporate governance policies and procedures. Training may be provided for first-time Directors in areas such as accounting, legal and industry-specific knowledge where appropriate. The costs of arranging and funding the training of the Directors will be borne by the Manager.

The Directors (including newly appointed Directors) are also regularly updated on new developments in laws and regulations or changes in regulatory requirements and financial reporting standards which are relevant to or may affect the Manager or the Trust. The Manager encourages and funds its Directors to attend training courses, so as to stay abreast of changes to the financial, legal and regulatory requirements and the business environment. The Directors may also, at any time, request for further explanations, briefings, or informal discussions on new developments in laws and regulations or changes in regulatory requirements and financial reporting standards, as well as any aspect of the Trust’s or the Manager’s operations or business issues.

BOARD COMPOSITION AND GUIDANCE

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

The composition of the Board is determined using the following principles:

1. Chairman should be a Non-executive Director;

2. At least one-third of the Board should comprise Independent Directors; and

3. The Board should be of appropriate size and mix of experience in business, finance, law and management skills critical to the Trust’s business and that each Director brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made.

To comply with the enhanced requirements implemented by MAS, the Board is currently searching for a suitable candidate to join the Board of Directors so that at least half the Board comprises independent directors.

The Board currently consists of five Directors, two of whom are non-executive and independent, that is, they have no relationship with the Manager, its related companies, its 10% shareholders, or their officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director’s independent business judgment with a view to the best interest of the Trust, and they are able to exercise objective judgment on corporate affairs independently from the management and its 10% shareholders. Furthermore, the Independent Directors are considered to be independent because they are not substantial Unitholders of the REIT, they do not have management or business relationships with the Manager and its related companies as well as the Trust and its subsidiaries and they are independent from the substantial shareholder of the Manager and substantial Unitholders of the Trust. As Non-executive Directors and Independent Directors make up more than half of the Board, no individual or group is able to dominate the Board’s decision making process.

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The NRC reviews the size and composition of the Board on an annual basis, and considers the present Board size and composition as appropriate for the current scope and nature of the Trust’s operations. The diversity of gender, skills, experience and core competencies of the members in areas such as accounting, finance, legal, property, and business development enables balanced and well-considered decisions to be made. Each Director has been appointed based on his or her experience and capability in relevant core competencies and ability to contribute to the Board. The NRC also regularly reviews its composition to ensure that the Board has the appropriate balance and diversity to maximise its effectiveness.

Based on the NRC’s recommendations, the Board is satisfied that there is a strong and independent element on the Board and that the present size of the Board is appropriate to facilitate effective decision making.

As part of the regulatory requirements for CMS licence holders, prior approval of the MAS is required for any change of the CEO or of any Board member.

CHAIRMAN AND CEO

Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.

The division of responsibilities and functions between the Chairman and the CEO has been demarcated to ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making. The Chairman, Mr Steven Lim Kok Hoong, and the CEO, Mr Kevin Xayaraj, are not related to each other, nor is there any business relationship between them.

The Chairman leads the Board to ensure its effectiveness by promoting a culture of openness and debate at the Board meetings on key issues pertinent to the business and operations of the Trust and the Manager. He encourages effective contribution from all Directors and facilitates constructive relations with the Board and between the Board and Management. He ensures the Directors receive complete, adequate and timely information and promotes effective communication with Unitholders on the performance of the Trust. He also spearheads the Manager’s drive to achieve and maintain high standards of corporate governance.

The CEO has full executive responsibilities over the business direction and operational decisions in managing the Trust. He is responsible for the day-to-day management of the Manager and the Trust and is accountable to the Board for the execution of the Board’s adopted strategies and policies.

BOARD MEMBERSHIP AND PERFORMANCE

Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.

Principle 5: There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.


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The NRC comprises the following Directors:

Mr Yong Kok Hoon (Chairman) (lndependent Director) Mr Steven Lim Kok Hoong (lndependent Director)Mr Henry Chua Tiong Hock (Non-executive Director)

The NRC is guided by its written Terms of Reference which sets out its authorities and duties.

The NRC reviews and makes recommendations to the Board on all nominations for appointments and re-appointments to the Board and the Board Committees. It also leads the process for the search, identification, evaluation and selection of suitable candidates for new directorships. In doing so, where necessary or appropriate, the NRC may tap on its networking contacts and/or engage professional headhunters to assist with identifying and shortlisting candidates. Furthermore, the NRC also reviews and makes recommendation to the Board on matters relating to the professional development and succession plans for senior management and members of the Board. Although no new Directors were appointed in FY 2016, as part of the NRC’s nomination process, the NRC will also take into account, among other things, the competing time commitments faced by Directors with multiple board memberships.

The Board has implemented an annual process which is carried out by the NRC for assessing the effectiveness of the Board as a whole and its Board Committees and for assessing the contribution by the Chairman and each individual Director to the effectiveness of the Board, based on performance criteria as approved by the Board. All Directors are required to assess the performance of the Board and its Committees using evaluation forms covering Board composition, Board information, Board process, internal control and risk management, Board accountability, CEO/top management and standards of conduct. The NRC also determines, among other things, the independence of Directors, whether Directors who hold multiple board representations or have other competing principal commitments are able to and have been adequately carrying out his or her duties, considering, inter alia, the Directors’ attendance, contribution and participation at Board meetings, Directors’ individual evaluations and the overall effectiveness of the Board. Feedback and comments received from the Directors are collated, analysed and reviewed by the NRC.

The Board ensures that the Directors give sufficient time and attention to the affairs of the Manager and the Trust. The Board is of the view that the limit on the number of listed company directorships that an individual may hold should be considered on a case-by-case basis, but as a general rule, each Director should hold no more than seven listed company board appointments. Based on the reviews by the NRC, the Board is of the view that the Board and its Committees operate effectively and each Director is contributing to the overall effectiveness of the Board. In accordance with Guideline 4.5 of the 2012 Code, no alternate directors were appointed.

The Board reviews annually whether a Director is considered an independent director based on the 2012 Code. The Board has ascertained that for the financial year under review, the Independent Directors (Mr Steven Lim Kok Hoong and Mr Yong Kok Hoon) are independent.

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ACCESS TO INFORMATION

Principle 6: In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.

Management endeavours to provide the Board with complete, adequate and timely information prior to board meetings and on an on-going basis to enable the Board to make informed decisions to discharge its duties and responsibilities. Directors are entitled to request for information from Management and Management seeks to provide the same in a timely manner.

Board meetings for each year are scheduled in advance to facilitate Directors’ individual arrangements in respect of on-going commitments. Prior to each meeting, Board papers on matters to be discussed with detailed explanatory information and other relevant materials are circulated in advance so that such matters may be considered thoroughly and fully, prior to the making of any decision. Explanatory information may also be in the form of briefings to the Directors or formal presentations by staff in attendance at Board meetings or by external professionals.

The number of Board meetings and Board committees meetings held during the year from 1 January 2016 to 31 December 2016 and Directors’ attendances are as follows:

Attendance of the Directors for FY 2016

Board Meetings AC Meetings NRC Meetings

No. of Meetings

AttendanceNo. of

MeetingsAttendance

No. of Meetings

Attendance

Mr Steven Lim Kok Hoong

4 4 4 4 1 1

Mr Yong Kok Hoon 4 4 4 4 1 1

Mr Kevin Xayaraj 4 4 N.A N.A N.A N.A

Mr Henry Chua 4 4 N.A N.A 1 1

Ms Ng Shin Ein 4 4 4 4 N.A N.A

The Board has access to management and the Company Secretary at all times. The Company Secretary (or representative) attends all Board meetings and ensures that all Board procedures and the requirements of the Companies Act, Cap. 50 and the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”) are followed. The appointment and removal of the Company Secretary is a matter for the Board to decide as a whole.

As a general rule, board papers, including the quarterly financial statements, are sent to directors in advance of each meeting for directors to be adequately prepared for each meeting. The Board papers are deliberated over and approved by the Board at the meetings, with the Company Secretary recording the minutes of proceedings.


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Directors may seek and obtain independent professional advice in the furtherance of their duties, if necessary. Any expenses and costs associated thereto will be borne by the Manager.

REMUNERATION MATTERS

PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

LEVEL AND MIX OF REMUNERATION

Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.

DISCLOSURE ON REMUNERATION

Principle 9: Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration, in the company’s Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.

The NRC, which has an independent majority, serves the crucial role of ensuring that a formal and transparent procedure is established for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. The remuneration policy comprises the following distinct objectives:

(a) to ensure that the procedure for determining remuneration for Directors and executive officers is formal and transparent;

(b) to ensure that the level of remuneration is sufficient to attract and retain Directors and that the remuneration packages are competitive in attracting and retaining employees;

(c) to ensure that no Director is involved in deciding on his own remuneration;

(d) to ensure that remuneration is commensurate with employees’ duties, responsibilities and length of service;

(e) to build sustainable value-creation to align with long term Unitholder interest;

(f) to reward employees for achieving performance targets; and

(g) to enhance retention of key talents to build strong organisational capabilities.

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The NRC determines remuneration packages and service terms of individual Directors and the CEO in accordance with the aforementioned policies. Directors’ fees also take into account the Directors’ level of participation and contribution and their respective responsibilities. The NRC also regularly reviews and recommends to the Board, the framework for salary reviews, performance bonus and incentives for the other key management personnel, taking into consideration the performance of the Trust and that of the individual employee. There are currently no option schemes or other long-term incentive schemes for Directors and employees of the Manager and all remuneration is paid in cash only. All non-executive directors are paid a fixed salary and the CEO’s remuneration is not linked to the gross revenue of the Trust. There are no employees who are immediate family members of any Director or the CEO and no such employee whose remuneration exceeds S$50,000 during the year. In addition, no director or executive officers are paid in the form of shares or interests in the Manager’s controlling shareholder or its related entities and their remuneration is also not linked (directly or indirectly) to the performance of any entity other than the REIT.

Accordingly, the NRC takes a holistic approach to the development of remuneration policies for the Trust, and the framework of remuneration for the Board, key management personnel and individual employees is not considered in isolation. The NRC also considers how to build up depth in management strength and development of key management personnel to ensure sustainability, continual development of talent and renewal of strong and competent leadership in the interests of the Trust.

The remuneration of the Directors and employees of the Manager are not paid out of the deposited property of the Trust (which is the listed entity), but remunerated directly by the Manager from the fees it receives. In this regard, the Manager’s report on each individual Director’s and the key management personnel’s remuneration paid and payable entirely in cash from 1 January 2016 to 31 December 2016 is disclosed as follows:

RemunerationSalary

S$’000

Bonus

S$’000

Director’s fee

S$’000

Other Benefits S$’000

Total

S$’000

Directors

Mr Kevin Xayaraj (CEO)

Mr Steven Lim Kok Hoong

Mr Yong Kok Hoon

Mr Henry Chua Tiong Hock

Ms Ng Shin Ein

424.0

-

-

-

-

53.0

-

-

-

-

90.0

90.0

55.0

55.0

12.0

-

-

-

-

489.0

90.0

90.0

55.0

55.0


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RemunerationSalary

%

Bonus

%

Other Benefits

%

Total

%

Key management personnel

S$250,000 – S$500,000

Mr Bobby Tay Chiew Sheng

Mr Aw Wei Been

Ms Tan Chiew Kian

85.6

77.5

82.0

10.7

19.4

17.1

3.7

3.1

0.9

100.0%

100.0%

100.0%

Note: Remuneration is based on amount paid and payable, based on the Trust’s financial year from 1 January 2016 to 31 December 2016. Bonus consists of annual wage supplement and performance bonus. Mobile and transport allowances are classified under Other Benefits. There were no other key management personnel.

By setting out the remuneration for each of the three key management personnel in bands of S$250,000 to S$500,000, the maximum and minimum range of the aggregate remuneration is apparent.

The key management team is small and to further disclose on a sensitive matter such as remuneration may subject the Manager to risk of staff turnover, which is not in the best interests of Unitholders. Therefore, the Board believes the Unitholders and the Trust will not be prejudiced as a result of such non-disclosure.

ACCOUNTABILITY AND AUDIT

ACCOUNTABILITY

Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

The Manager prepares the financial statements in accordance with the Singapore Financial Reporting Standards prescribed by the Accounting Standards Council and Sabana REIT complies with Rule 705 of the Listing Manual of the SGX-ST (where applicable), which prescribes, among others, that quarterly results are to be announced no later than 45 days of the reporting period while full year results are to be announced no later than 60 days of the financial year end. In presenting the financial reports, the Board aims to provide a balanced and understandable assessment of the Trust’s performance, position and prospects.

RISK MANAGEMENT AND INTERNAL CONTROLS

Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.

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The Board, through the AC, reviews the adequacy of the Manager’s risk management framework and ensures that a robust system of risk management and internal controls are in place to safeguard the interests of the Unitholders. The Manager benchmarks its risk management practices against the Risk Governance Guidance For Listed Boards for best standards.

The AC, through the assistance of internal and external auditors, reviews and reports to the Board on the adequacy and effectiveness of the Manager’s system of controls, including financial, operational, compliance and information technology controls put in place by the management as part of the framework.

The Manager has adopted an enterprise-wide risk management (“ERM”) framework to enhance its risk management capabilities. Through a structured risk identification process and the use of a risk register, the key financial, operational and compliance risks identified by the Management are documented and presented against the response strategies and control measures put in place to mitigate those risks. To enhance risk mitigation, the ERM framework is integrated with the internal auditor’s annual work plan.

The following section presents a brief summary of the Trust’s exposure to financial, operational, and compliance risks and the key measures in addressing these risks.

Financial Risk

In managing the Trust, the Manager adheres to all applicable financial covenants set by lenders as well as the aggregate leverage limit imposed by MAS in the Property Funds Appendix. To minimise financial risks, the Manager reviews the capital management policy of the Trust regularly and provides periodic updates to the Directors. All major capital market initiatives require the prior approval of the Board.

By employing an appropriate mix of debt and equity to finance property acquisitions, maintaining a certain level of cash for working capital and employing available Shari’ah-compliant derivatives to hedge risk exposure, the Manager strikes a strategic balance between safeguarding the going concern ability and optimal capital structure of the Trust with maximising Unitholders’ value. Please refer to pages 146 to 153 for more details.

With effect from 1 January 2016, under the Property Funds Appendix, the Trust is allowed to have an aggregate leverage of up to 45% of its deposited property. The Trust has complied with the aggregate leverage limit throughout the year.

Operational Risk

The Manager has put in place a manual of standard operating procedures designed to identify, monitor, report and manage the operational risks associated with the day-to-day management of the Trust. The manual of standard operating procedures covers key risk areas such as investments and acquisitions, property and lease management, interested party transactions, finance and accounting, compliance, and information technology controls, and is periodically reviewed to stay relevant and effective.


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The Manager recognises that there is a significant amount of risk inherent in making property investment decisions. Accordingly, the Manager sets out clear procedures when making such decisions. For instance, an investment and risk management committee (comprising key members of the management, the investment officer , compliance officer and a representative of the Sponsor) was set up to ensure comprehensive due diligence is carried out in relation to each proposed investment. All property purchases and divestments require the prior approval of the Board.

Control self-assessments in key areas of operations are conducted by the Management on a periodic basis. Internal auditors, PricewaterhouseCoopers LLP (“PWC”)1 had also been engaged to perform independent reviews of the adequacy and effectiveness of the risk management processes and internal controls (see Principle 13). The Manager also has a Business Continuity Plan and a comprehensive insurance coverage in accordance with industry standards.

Compliance Risk

The Trust is subject to various rules and regulations stipulated by SGX-ST and other regulatory bodies. Any changes to the rules and regulations may affect the Trust’s business.

The Manager holds a CMS licence for real estate investment trust management and its key officers are appointed as representatives by MAS under the SFA. Failure to comply with the regulations imposed by MAS may result in the licences being revoked or not renewed, adversely affecting the Trust’s operations.

The Manager has policies and procedures for ensuring compliance with the applicable provisions of the SFA and all other relevant legislations, rules, notices and guidelines, including the Listing Manual of the SGX-ST, the Code on Collective Investment Schemes issued by the MAS including Property Funds Appendix, the Manager’s obligations under the Trust Deed, Singapore Financial Reporting Standards, any tax ruling and the relevant contracts.

To mitigate non-compliance, the compliance officer regularly consults the regulatory bodies and works closely with the auditors, legal counsels, Company Secretary, senior management and AC to ensure adherence to all stipulated rules and regulations.

Board’s Opinion on Internal Controls

Based on the internal controls and risk management framework established and maintained by the Management, work performed by the internal and external auditors, the assurance from the CEO and CFO that the financial records have been properly maintained, that the financial statements give a true and fair view of the Trust’s operations and finances, and the assurance from the CEO and CFO regarding the effectiveness of the Manager’s risk management and internal control systems, the Board, with the concurrence of the AC, is of the view that taking into account the nature, scale and complexity of the Manager’s operations, the Trust’s financial, operational, compliance and information technology controls, and risk management systems were adequate and effective as at 31 December 2016.

1 In reviewing and monitoring the Manager’s internal controls, the AC takes into consideration the need for periodic rotation of internal auditors. After October 2016, Ernst & Young Advisory Pte Ltd (“EY”) was appointed to perform independent reviews of the adequacy and effectiveness of the risk management processes and internal controls. The AC thanks PWC for their contributions.

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In this regard, the Board notes that the system of internal controls and risk management provide a reasonable but not absolute assurance that the Trust will not be severely affected by any event that could be reasonably foreseen. Neither can any system of internal controls and risk management provide absolute assurance against the occurrence of material errors, poor judgment, human error, losses, fraud or other irregularities.

AUDIT COMMITTEE

Principle 12: The Board should establish an AC with written terms of reference which clearly set out its authority and duties.

The AC assists the Board in fulfilling responsibilities relating to corporate governance and interested party transactions.

The AC is governed by written terms of reference defining its authority and duties, with explicit authority to investigate any matter within its term of reference. The AC has full access to and co-operation by Management and full discretion to invite any Director or employee of the Manager to attend its meetings.

As at 31 December 2016, the AC members were:

Mr Yong Kok Hoon (Chairman) (Independent Director)Mr Steven Lim Kok Hoong (lndependent Director)Ms Ng Shin Ein1 (Non-executive Director)

The main duties of the AC includes reviewing and monitoring the effectiveness of the Manager’s internal controls relating to financial, operational, compliance and risk management processes. The AC receives regular updates by external auditors to keep abreast of changes to accounting standards and issues which may have a direct impact on financial statements. The AC meets with internal and external auditors without the presence of management at least once a year.

The AC meets at least once every quarter and the key activities include:

• Reviewing and recommending to the Board for approval, the quarterly and full year financial results and related SGX announcements;

• Reviewing Related Party Transactions and any donations of income derived from non-Shari’ah compliant sources or non-core activities to charities;

• Reviewing and approving the internal and external audit plans to ensure adequacy of the audit scope;

• Reviewing the adequacy and effectiveness of the internal audit function;

• Reviewing and evaluating with internal and external auditors, the adequacy and effectiveness of internal control systems, including financial, operational and compliance controls, and risk management policies and framework;


1 Following Ms Ng’s resignation, there will only be two AC members and the Manager will be searching for a new director to be appointed to the Board and the Audit Committee, so as to comply with the requirements of the Code.

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• Reviewing the internal and external audit reports and monitoring the timely and proper implementation of any corrective or improvement measures;

• Reviewing the nature and extent of non-audit services performed by the external auditors.

• Reviewing the independence and objectivity of the external auditors, and recommending to the Board on their re-appointment; and

• Reviewing whistle-blowing arrangements put in place by Management.

The Board is of the view that all the members of the AC are suitably qualified with finance and legal backgrounds to assist the Board in the areas of internal controls, financial and accounting matters, compliance and risk management, including oversight over Management in the design, implementation and monitoring of risk management and internal control systems.

External Auditors

The AC makes recommendation to the Board on the appointment/re-appointment of the external auditors, taking into consideration the scope, results of the audit, as well as the cost effectiveness, independence and objectivity of the external auditors.

During the year, the AC has conducted a review of all non-audit services provided by the external auditors to Sabana REIT and its subsidiaries and is satisfied that the extent of such services will not prejudice the independence and objectivity of the external auditors. The amount paid and payable to external auditors for audit and non-audit services fees were approximately S$254,000 and S$90,000 respectively, for the financial year under review.

The AC, with the concurrence of the Board, has recommended the re-appointment of KPMG LLP as the external auditors. The re-appointment of the external auditors will be subject to approval by way of an ordinary resolution of Unitholders at the AGM, to be held on 28 April 2017.

In appointing the audit firms for the Trust and its subsidiaries, the Board is satisfied that the Trust has complied with the requirements of Rules 712 and 715 of the Listing Manual of the SGX-ST.

Whistle-blowing Policy

The AC has established procedures to provide employees of the Manager and the tenants and vendors of the Trust with well-defined and accessible channels to report on suspected fraud, corruption, dishonest practices or other similar matters relating to the Trust or the Manager, and for the independent investigation of any reports and appropriate follow-up action.

The aim of the whistle-blowing policy is to encourage the reporting of such matters in good faith, with the confidence that those making such reports will be treated fairly, and to the extent possible, be protected from reprisal. Where appropriate, an independent third party may be appointed to assist in the investigation.

There were no reports of whistle-blowing received for the year.

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INTERNAL AUDIT

Principle 13: The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.

The internal audit function of the Manager was outsourced to PWC. The internal auditors are guided by the International Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors, and report directly to the AC on audit matters.

The internal auditors conduct audit reviews based on the internal audit plan approved by the AC, and report their findings and recommendations to management who would respond on the actions to be taken. The internal auditors submit internal audit reports at least twice yearly to the AC. The AC is of the view that the internal auditors have adequate resources to perform its functions.

SHAREHOLDER RIGHTS AND RESPONSIBILITIES

SHAREHOLDER RIGHTS

Principle 14: Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements.

COMMUNICATION WITH UNITHOLDERS

Principle 15: Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.

The Manager is committed to regular, effective and fair communication with Unitholders. It has a dedicated IR team which regularly communicates with the Unitholders and attends to their queries and concerns.

The Manager’s disclosure policy requires the timely and full disclosure of all material information relating to the Trust by way of public releases or announcement through the SGX-ST via SGXNET at first instance and subsequently, by way of release on the website at http://www.sabana-reit.com. The Manager clearly communicates its current policy of distributing 100% of its distributable income to Unitholders. The Manager conducts regular briefings for analysts which will generally coincide with the release of the Trust’s quarterly results. The IR team utilises its website as a means of providing information to the Unitholders and the broader investment community. News releases, investor presentations and quarterly and full year financial results are available on the website immediately after they have been released to the market.

More details on IR activities and efforts are found on pages 18 - 19 of this Annual Report.


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CONDUCT OF SHAREHOLDER MEETINGS

Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

The Manager welcomes active Unitholder participation at the AGM. It believes that AGMs serve as an opportune forum for Unitholders to meet the Board and senior management and to communicate their views.

The Manager has implemented the system of voting by poll at its AGMs. Results of each resolution put to vote at the AGM are processed by independent scrutineers and the results are be announced with details of percentages in favour and against. Separate resolutions are proposed for substantially separate issues at the meetings.

The Chairman of the Board, the respective Chairmen of the Board Committees, Management and the external auditors are present to address Unitholders’ queries at the AGMs.

DEALING IN SECURITIES

The Manager’s Code of Best Practices on Securities Transactions encourages Directors and employees to hold Units but forbids them to:

• Trade during the black-out period, which commences one month before the announcement of property valuations, quarterly or annual results to the public and ending on the day of announcement or other specified date.

• Trade at any time in possession of price-sensitive information.

• Communicate price-sensitive information to any person as imposed by insider trading laws.

• Trade in Units on short-term considerations.

Directors are also required to disclose their dealings in Units to the Manager within two business days after such acquisition or occurrence. Announcements of such interest notifications will be made via SGXNET.

In addition, the Manager will comply with any relevant disclosure requirements under the SFA. The Manager has also undertaken that it will not deal in the Units during the period commencing one month before the public announcement of the Trust’s annual results, quarterly results and (where applicable) property valuations, and ending on the date of announcement of the relevant results, or the case may be, property valuations.

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DEALING WITH CONFLICTS OF INTEREST

The following procedures are established by the Manager to deal with potential conflicts of interest issues:

• The Manager is dedicated to Sabana REIT and will not manage other REITs which invest in similar properties as Sabana REIT.

• All executive officers will be working exclusively for the Manager and will not hold executive positions in other firms;

• At least one third of Directors must be independent. All resolutions in writing of the Directors in relation to matters concerning the Trust must be approved by a majority of the Directors who do not hold an interest, including at least two Independent Directors;

• In respect of matters in which the Sponsor and/or its subsidiaries have an interest, direct or indirect, any nominees appointed by the Sponsor and/or its subsidiaries to the Board to represent their interest will abstain from voting. In such matters, the quorum must comprise a majority of the Independent Directors and must exclude the nominee Directors of the Sponsor and/ or its subsidiaries.

• It is also provided in the Trust Deed that if the Manager is required to decide whether or not to take any action against any person in relation to any breach of any agreement entered into by the Trustee for and on behalf of the Trust with a related party of the Manager, the Manager shall be obliged to consult a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee has a prima facie case against the party allegedly in breach under such agreement, the Manager shall be obliged to take appropriate action in relation to such agreement. The Directors shall have a duty to ensure that the Manager so complies. Notwithstanding the foregoing, the Manager shall inform the Trustee as soon as it becomes aware of any breach of any agreement entered into by the Trustee for and on behalf of the Trust with a related party of the Manager and the Trustee may take any action it deems necessary to protect the rights of Unitholders and/or which is in the interest of Unitholders. Any decision by the Manager not to take action against a related party of the Manager shall not constitute a waiver of the Trustee’s right to take such action as it deems fit against such related party.

There are no material contracts entered into by Sabana REIT or any of its subsidiaries that involve the interests of the CEO, any Director or any controlling Unitholder, except as disclosed in this annual report.


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DEALING WITH RELATED PARTIES

The Manager has established procedures to ensure that all Related Party Transactions will be undertaken on an arm’s length basis and on normal commercial terms, which are generally no more favourable than those extended to unrelated third parties. Thus, the interests of the Trust and the Unitholders will not be prejudiced. All Related Party Transactions will be subjected to regular periodic reviews by the AC:

• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding S$100,000.00 in value but below 3% of the value of Sabana REIT’s net tangible assets will be subject to review by the AC at regular intervals;

• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding 3% but below 5% of the value of Sabana REIT’s net tangible assets will be subject to review and prior approval of the AC and immediately announced on SGX-ST. Such approval shall only be given if the transactions are on normal commercial terms and are consistent with similar types of transactions made by the Trustee with third parties which are unrelated to the Manager;

• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding 5% of the value of Sabana REIT’s net tangible assets will be reviewed and approved prior to such transactions being entered into, on the basis described in the preceding paragraph, by the AC which may, as it deems fit, request advice on the transactions from independent advisers, including the obtaining of valuations from independent professional valuers. Furthermore, under the Listing Manual of the SGX-ST and the Property Funds Appendix, such transactions would have to be approved by the Unitholders at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed; and

• Aggregate value of Related Party Transactions entered into during the financial year under review will be disclosed in the Annual Report. See page 168 for the disclosure.

As a general rule, the Manager must demonstrate to its AC that such transactions satisfy the foregoing criteria, which may entail obtaining (where practicable) quotations from parties unrelated to the Manager; or obtaining two or more valuations from independent professional valuers (in accordance with the Property Funds Appendix).

For Related Party Transactions entered into or to be entered into by the Trustee, the Trustee is required to consider the terms of such transactions to satisfy itself that such transactions are conducted on an arm’s length basis and on normal commercial terms, are not prejudicial to the interests of the Trust and the Unitholders, and are in accordance with all applicable requirements of the Property Funds Appendix and/or the Listing Manual of the SGX-ST relating to the transaction in question.

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Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into a Related Party Transaction. If the Trustee is to sign any Related Party Transaction contract, the Trustee will review the contract to ensure that it complies with the requirements relating to Related Party Transactions as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to real estate investment trusts.

The Manager will maintain a register to record and will incorporate into its internal audit plan a review, of all Related Party Transactions which are entered into by the Trust. The AC shall review the internal audit reports to ascertain that the guidelines and procedures established to monitor Related Party Transactions have been complied with. In addition, the Trustee will also have the right to review such audit reports to ascertain that the Property Funds Appendix have been complied with. The AC will periodically review all Related Party Transactions to ensure compliance with the Manager’s internal control procedures and with the relevant provisions of the Property Funds Appendix and/or the Listing Manual of the SGX-ST. The review will include the examination of the nature of the transactions and the supporting documents or such other data deemed necessary by the AC.

If a member of the AC has an interest in a transaction, he is required to abstain from participating in the review and approval process in relation to that transaction.

DEALING WITH SHARI’AH COMPLIANCE

Shari’ah compliance means adherence to the tenets of Islamic law, which places due consideration upon ethics and social responsibility. The Manager ensures total non-Shari’ah compliant rental income does not exceed 5% per annum of the gross revenue of the Trust’s portfolio of properties. As part of the due cleansing procedure, donation of non-compliant income is made to charitable causes (without tax benefits) on a quarterly basis. For FY 2016, the non-compliant income came to approximately 0.29% of gross revenue.

Five Pillars Pte. Ltd. (“Five Pillars”), based in Singapore, was appointed by the Manager to act as the Shari’ah Adviser. Five Pillars serves as a conduit between the Independent Shari’ah Committee (“ISC”) and the compliance officer of the Manager, liaising frequently on Shari’ah matters throughout the year.

The ISC comprises eminent scholars and experts. They are:

• Dr. Mohamed Ali Elgari (Professor at King Abdulaziz University in Saudi Arabia);

• Professor Dr. Obiyathulla Ismath Bacha (Professor at the International Centre for Education in Islamic Finance in Malaysia); and

• Dr. Ashraf bin Mohammed Hashim (Associate Professor at International Islamic University Malaysia)


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The Trust follows the standards promulgated by the Auditing and Accounting Organisation of the Islamic Financial Institutions and/or the Islamic Financial Services Board. To assess on-going compliance of the Trust, the Shari’ah Adviser, on behalf of and working closely with the ISC:

• Prior to the issuance of the Shari’ah certificate for annual status, an inspection and verification will be conducted on the properties and activities of the Trust. A representative of Five Pillars will visit the individual properties in the portfolio to ensure that businesses on the premises are compliant and agree with the leasing contracts signed. For FY 2016, the Trust successfully passed the inspection.

• For new funding, consent will be obtained on inception. Shari’ah certification and other supporting documents from the issuing or arranger bank will be vetted and approved by the ISC. For FY 2016, the Trust has not utilised interest-based borrowing or other non-Shari’ah compliant financing.

On completion of the annual audit, the ISC will sign off and issue the certificate which will be delivered by the Shari’ah Adviser to the Manager. The Trust has successfully renewed its annual Shari’ah certificate, valid until 31 December 2017. The certificate is displayed on the Trust’s website www.sabana-reit.com. The total amount of fees incurred for Shari’ah advisory services for FY 2016 was approximately S$103,000.

Under Shari’ah principles, provisions are made for remedial actions. In the event of a breach or deviation, the Manager must disclose as soon as practicable to the Shari’ah Adviser and the ISC the necessary details and supporting documents. Rectification as advised is applied to the particular activity within an agreed time frame before any distributions are made to Unitholders.

UTILISATION OF RIGHTS ISSUE PROCEEDS

On 20 December 2016, the Manager launched the Rights Issue to raise gross proceeds of approximately S$80.2 million. On 6 February 2017, the Manager made an announcement via SGXNET to provide an update on the use of proceeds as follows: (a) S$60.0 million to repay an existing five-year S$75.0 million term Commodity Murabaha facility due

in August 2017;

(b) S$16.5 million to be placed in short-term bank deposits;

(c) approximately S$2.5 million to pay the underwriting commission and expenses including the applicable GST thereon to the Joint Lead Managers and Underwriters; and

(d) approximately S$1.2 million to pay the other professional fees and charges relating to the Rights Issue.

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FEES PAYABLE TO THE MANAGER

The Manager is entitled under Clauses 15.1 and 15.2 of the Trust Deed to the following fees:

Fees payable by the Trust

Amount payable

1 Management fee (payable to the Manager or its nominee)

Base FeeA fee not exceeding the rate of 0.5% per annum of the value of the Deposited Property.

Performance Fee0.5% per annum (or such lower percentage as may be determined by the Manager in its absolute discretion) of the Net Property Income of Sabana REIT or its relevant Special Purpose Vehicles (“SPVs”) in each financial year, payable on a yearly basis, provided Sabana REIT achieves at least 10% annual growth in DPU over the previous financial year (calculated after accounting for the performance fee (if any) for that financial year and after adjusting, at the discretion of the Manager, for any new Units arising from the conversion or exercise of any instruments convertible into Units which are outstanding at the time of calculation, and any rights or bonus issue, consolidation, subdivision or buy-back of Units).

The Manager may elect to receive the Base Fee and Performance Fee in cash or Units or a combination of cash and Units (as it may in its sole discretion determine).

The Manager has elected to receive 80.0% of the Base Fee in the form of Units for FY 2016.

2 Fee for acquisition of properties (payable to the Manager or its nominee)1

Acquisition Fee1.0% (or such lower percentage as may be determined by the Manager in its absolute discretion) of the acquisition price of real estate of real estate-related assets acquired:

• in relation to an acquisition (whether directly or indirectly through one or more SPVs of any real estate, the acquisition price of any real estate purchased by the Trust, plus any other payments2 in addition to the acquisition price made by the Trust or its SPVs to the vendor in connection with the purchase of the real estate (pro-rated if applicable to the proportion of the Trust’s interest);

1 Acquisition fees are paid in cash. Whereby properties are acquired from interested parties, acquisition fees will be paid in Units issued by Sabana REIT at the prevailing market price and will be held for one year from the date of issuance.

2 “Other payments” refers to additional payments to the vendor of the asset, for example, where the vendor has already made certain payments for enhancements to the asset, and the value of the asset enhancements is not reflected in the acquisition price as the asset enhancements are not completed, but “other payments” do not include stamp duty or other payments to third party agents and brokers.


90



• in relation to an acquisition (whether directly or indirectly through one or more SPVs of the Trust) of any SPVs or holding entities which holds real estate, the underlying value of any real estate which is taken into account when computing the acquisition price payable for the acquisition from the vendor of the equity interests of any vehicle holding directly or indirectly the real estate purchased by the Trust, plus any additional payments made by the Trust or its SPVs to the vendor in connection with the purchase of such equity interests) (pro-rated if applicable to the proportion of the Trust’s interest); or

• the acquisition price of any investment by the Trust, whether directly or indirectly through one or more SPVs, in any debt securities of any property corporation or other SPV owning or acquiring real estate.

3 Fee for divestment of properties (payable to the Manager or its nominee)3

Divestment Fee0.5% (or such lower percentage as may be determined by the Manager in its absolute discretion) of each of the following as is applicable (subject to there being no double-counting):

• the sale price of any real estate sold or divested, whether directly or indirectly through one or more SPVs, by the Trust (plus any other payments4 in addition to the sale price received by the Trust or its SPVs from the purchaser in connection with the sale or divestment of the real estate) (pro rated if applicable to the proportion of the Trust’s interest);

• the underlying value of any real estate related assets which is taken into account when computing the sale price for such real estate-related assets, sold or divested, whether directly or indirectly through one or more SPVs, by the Trust (pro rated if applicable to the proportion of the Trust’s interest); or

• the sale price of any investment by the Trust, whether directly or indirectly through one or more SPVs, in any debt securities of any property corporation or other SPVs owning or acquiring real estate.

3 Divestment fees are paid in cash. Whereby properties are sold to interested parties, divestment fees will be paid in Units issued by Sabana REIT at the prevailing market price and will be held for one year from the date of issuance.

4 “Other payments” refers to additional payments to the Trust or its SPVs for the sale of the asset, for example, where the Trust or its SPVs have already made certain payments for enhancements to the asset, and the value of the asset enhancements is not reflected in the sale price as the asset enhancements are not completed, but do not include stamp duty or other payments to third party agents and brokers.

The Manager is responsible for managing the assets and liabilities of the Trust for the benefit of its Unitholders. Accordingly, the Manager should be compensated fairly for its efforts in the overall management of the Trust’s various affairs. The Manager will be receiving the majority of its Base Fees in Units and this will serve to align the interests of the Manager with that of Unitholders as the Manager will assume an interest in the performance of the Trust. The Base Fee payable to the Manager has been assessed by the Board and the Board believes that the Base Fee is reasonable and in line with market rates.

91


No Performance Fees were payable for FY 2016. The Board would like to inform Unitholders that Performance Fees are only payable when the Manager has achieved a certain level of growth in DPU over the previous financial year. Accordingly, the Board is of the view that the Performance Fee will incentivise the Manager to seek growth opportunities and encourage the Manager to act in the interests of Unitholders to enhance the DPU. An increase of the DPU by 10% year-on-year is challenging and the Performance Fee will incentivise the Manager to take a holistic and balanced approach towards assuming sensible risks to grow the Trust over the long-term. In addition, the Performance Fee payable to the Manager has been assessed by the Board and the Board believes that the Trust’s Performance Fee is reasonable and in line with market practices.

The Acquisition Fee and Divestment Fee are necessary to incentivise the Manager to source for inorganic growth and to realise gains from the divestment of mature assets that no longer suit the portfolio. The Manager has to undertake additional scope of work over and above the overall management of the Trust when undertaking acquisition or divestment opportunities and should be compensated fairly to reflect the effort expended and the costs incurred in such transactions. Accordingly, the Board has considered and is of the view that the Acquisition Fee and Divestment Fee are reasonable and in line with market rates to ensure that the Manager acts in the interests of the Trust and Unitholders.

The Property Manager, as a wholly-owned subsidiary of the Manager, is entitled under the Master Property Management Agreement to the following fees:

Payable by the Trust

Amount payable

1 Property management fee (payable to the Property Manager)

Property Management Fee2.0% per annum of gross revenue of each property under the management of the Property Manager.

2 Lease management fee (payable to the Property Manager)

Lease Management Fee1.0% per annum of gross revenue of each property under the management of the Property Manager.

The Property Manager provides property management services to the Trust. In return for its services, the Property Manager should be compensated fairly for its efforts. The fees payable to the Property Manager has been assessed by the Board. The Board believes that the fees payable to the Property Manager are reasonable and in line with market rates. In addition, the Property Management Fee and Lease Management Fee have been structured so that the Property Manager is incentivised to improve the performance of the properties as these fees are pegged to the gross revenue of the properties.


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FINANCIAL CONTENTS94 Report of the Trustee 95 Statement by the Manager96 Independent Auditors’ Report101 Statements of Financial Position102 Statements of Total Return103 Distribution Statements 105 Statements of Movements in Unitholders’ Funds106 Consolidated Portfolio Statement111 Consolidated Statement of Cash Flows113 Notes to the Financial Statements

HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”) is under a duty to take into custody and hold the assets of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (the “Trust”) and its subsidiaries (the “Group”) in trust for the holders (“Unitholders”) of units in the Trust (the “Units”). In accordance with the Securities and Futures Act, Chapter 289, of Singapore, its subsidiary legislation and the Code on Collective Investment Schemes, the Trustee shall monitor the activities of Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”) for compliance with the limitations imposed on the investment and borrowing powers as set out in the trust deed dated 29 October 2010 (as amended by the First Supplemental Deed dated 2 December 2010, the First Amending and Restating Deed dated 24 February 2016 and the Second Amending and Restating Deed dated 24 March 2016) (collectively, the “Trust Deed”) between the Manager and the Trustee in each annual accounting period and report thereon to Unitholders in an annual report.

To the best knowledge of the Trustee, the Manager has, in all material respects, managed the Trust during the period covered by these financial statements, set out on pages 101 to 167 in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed.

For and on behalf of the Trustee,HSBC Institutional Trust Services (Singapore) Limited

__________________________________Esther FongSenior Vice President, Trustee Services

Singapore15 March 2017

Report of the Trustee

94


Statement by the Manager

In the opinion of the directors of Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”), the accompanying financial statements of Sabana Shar’iah Compliant Industrial Real Estate Investment Trust (the "Trust") and its subsidiaries (the "Group") set out on pages 101 to 167 comprising the Statements of Financial Position, Statements of Total Return, Distribution Statements and Statements of Movements in Unitholders’ Funds of the Group and of the Trust, Consolidated Portfolio Statement and Statement of Cash Flows of the Group and notes to the financial statements are drawn up so as to present fairly, in all material respects, the financial position of the Group and of the Trust as at 31 December 2016, the total return, distributable income and movements in Unitholders’ funds of the Group and of the Trust and cash flows of the Group for the year then ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants and the provisions of the Trust Deed. At the date of this statement, there are reasonable grounds to believe that the Group and the Trust will be able to meet their financial obligations as and when they materialise.

For and on behalf of the Manager,Sabana Real Estate Investment Management Pte. Ltd.

__________________________________Kevin XayarajExecutive Director and Chief Executive Officer


95


UnitholdersSabana Shari’ah Compliant Industrial Real Estate Investment Trust

(Constituted in the Republic of Singapore pursuant to a trust deed dated 29 October 2010 (as amended by the First Supplemental Deed dated 2 December 2010, the First Amending and Restating Deed dated 24 February 2016 and the Second Amending and Restating Deed dated 24 March 2016))

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (the “Trust”) and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position and consolidated portfolio statement of the Group and the statement of financial position of the Trust as at 31 December 2016, the consolidated statement of total return, consolidated distribution statement, consolidated statement of movements in Unitholders’ funds and consolidated statement of cash flows of the Group and the statement of total return, distribution statement and statement of movements in Unitholders’ funds of the Trust for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 101 to 167.

In our opinion, the accompanying consolidated financial statements of the Group and the statement of financial position, the statement of total return, distribution statement and statement of movements in Unitholders’ funds of the Trust present fairly, in all material respects, the consolidated financial position of the Group and the financial position of the Trust as at 31 December 2016 and the consolidated total return, consolidated distributable income, consolidated movements in Unitholders’ funds and consolidated cash flows of the Group and the total return, distributable income, movements in Unitholders’ funds of the Trust for the year ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” (“RAP 7”) issued by the Institute of Singapore Chartered Accountants.

Basis for opinion

We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Our responsibilities under those standards are further described in the ‘Auditors’ Responsibilities for the Audit of the Financial Statements’ section of our report. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independent Auditors’ Report

96


Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of investment properties (Refer to Note 4 to the financial statements)

Risk

The Group’s property portfolio, valued at approximately $1,003.6 million as at 31 December 2016, comprises 21 properties strategically located across Singapore. The Group has four main industrial property segments: High-tech Industrial, Chemical Warehouse and Logistics, Warehouse and Logistics and General Industrial.

The investment properties are stated at fair values based on independent external valuations. The independent external valuers use valuation techniques including income capitalisation approach, discounted cash flow method and direct comparison method. The key assumptions used and estimates to be applied in determining the valuation of investment properties involve significant judgement, and as a result, the valuation process is considered as a key audit matter.

How the matter was addressed in our audit

We assessed the Group’s process for selection of external valuers and understood the scope of work of the valuers. We evaluated the competence, capability and objectivity of the external valuers engaged by the Group and held discussions with the valuers to understand their valuation methods and key assumptions used.

We considered the appropriateness of the valuation methodologies adopted and assessed the reasonableness of the key assumptions and estimates used. We compared the key assumptions and estimates which include capitalisation rate, discount rate and terminal yield with available industry data, taking into consideration comparability and market forces. Where the key inputs were outside the expected range, we undertook further procedures and held further discussions with the valuers to understand the effects of additional factors taken into account in the valuations. We also considered the adequacy of the disclosures in the financial statements.

Our findings

The external valuers are members of generally-recognised professional bodies for valuers. The approach to the methodologies and in deriving the assumptions in the valuations is supported by market data and practices, and the disclosures in the financial statements are in compliance with RAP 7.

Independent Auditors’ Report (continued)

97


Other information

Sabana Real Estate Investment Management Pte. Ltd., the manager of the Trust (the "Manager"), is responsible for the other information. The other information comprises the Letter to Unitholders, Corporate Profile, Core Values, Vision and Mission, Our Strategy, Our Trust Structure, Shari’ah Compliance Commonly Asked Questions, 2016 Significant Events, Financial Highlights, Financial Review, Investor Relations, Unit Performance, Independent Market Study, Property Portfolio, Operations Review, Board of Directors, Management Team, Corporate Social Responsibility, Corporate Governance Report, Report of the Trustee, Statement by the Manager, Additional Information and Statistics of Unitholdings.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Manager for the financial statements

The management of the Manager is responsible for the preparation and fair presentation of these financial statements in accordance with the recommendations of RAP 7 issued by the Institute of Singapore Chartered Accountants, and for such internal control as the management of the Manager determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Manager is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management of the Manager either intends to terminate the Group or to cease operations, or has no realistic alternative but to do so.

The Manager’s responsibilities include overseeing the Group’s financial reporting process.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.


98


As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

• Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management of the Manager.

• Conclude on the appropriateness of the Manager’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit.


99


We also provide the directors of the Manager with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Manager, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless the law or regulations preclude public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors’ report is Karen Lee Shu Pei.

KPMG LLPPublic Accountants andChartered Accountants



The accompanying notes form an integral part of these financial statements.

100


Group TrustNote 2016 2015 2016 2015

$’000 $’000 $’000 $’000

Non-current assetsInvestment properties 4 990,600 1,090,200 990,600 1,090,200Subsidiaries 6 – – * *Derivative assets 12 522 – 522 –

991,122 1,090,200 991,122 1,090,200

Current assetsInvestment properties held for divestment 4 13,000 54,600 13,000 54,600Derivative assets 12 – 403 – 403Trade and other receivables 7 9,561 9,758 9,553 9,750Cash and cash equivalents 8 9,206 10,438 9,201 10,432

31,767 75,199 31,754 75,185

Total assets 1,022,889 1,165,399 1,022,876 1,165,385

Current liabilitiesTrade and other payables 9 14,097 14,438 14,095 14,431Borrowings 10 130,209 147,288 130,440 147,288Derivative liabilities 12 562 2 562 –

144,868 161,728 145,097 161,719

Non-current liabilitiesTrade and other payables 9 13,511 15,928 13,511 15,928Borrowings 10 307,715 333,796 307,715 334,329Derivative liabilities 12 – 206 – 206

321,226 349,930 321,226 350,463

Total liabilities 466,094 511,658 466,323 512,182

Net assets 556,795 653,741 556,553 653,203

Represented by:

Unitholders’ funds 556,795 653,741 556,553 653,203

Units issued and to be issued (’000) 13 742,371 734,027 742,371 734,027

* Less than $1,000

Statements of Financial Position


As at 31 December 2016

101



$’000 $’000 $’000 $’000

Gross revenue 16 91,807 100,824 91,807 100,824Property expenses 17 (34,865) (29,219) (34,865) (29,219)Net property income 56,942 71,605 56,942 71,605

Finance income 293 130 293 130Finance costs (21,089) (21,548) (20,773) (21,106)Net finance costs 18 (20,796) (21,418) (20,480) (20,976)

Amortisation of intangible assets – (447) – (447)

Manager’s fees 19 (5,333) (6,263) (5,333) (6,263)Trustee’s fees (454) (544) (454) (544)Donation of non-Shari’ah compliant

income 20 (113) (63) (113) (63)Other trust expenses 21 (1,055) (1,209) (1,073) (1,226)Loss on exercise of put option on

Convertible Sukuk by Sukukholders – (648) – (227)(6,955) (8,727) (6,973) (8,323)

Net income 29,191 41,013 29,489 41,859Net change in fair value of financial

derivatives (235) 2,259 (237) 1,660Net change in fair value of investment

properties (90,862) (116,708) (90,862) (116,708)Loss on divestment of investment

properties (558) – (558) –Total return for the year before

taxation and distribution (62,464) (73,436) (62,168) (73,189)Tax expense 22 * * – –Total return for the year after taxation

and before distribution (62,464) (73,436) (62,168) (73,189)

Earnings per Unit (cents)Basic 23 (8.48) (10.07) (8.44) (10.04)Diluted 23 (8.48) (10.07) (8.44) (10.04)

* Less than $1,000

Statements of Total Return


For the year ended 31 December 2016

102


Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Income available for distribution to Unitholders at beginning of the year 11,120 12,992 11,120 12,992

Total return for the year after taxation and before distribution (62,464) (73,436) (62,168) (73,189)

Non-tax deductible/(chargeable) items:Manager’s fees paid/payable in Units 4,266 5,011 4,266 5,011Amortisation of intangible assets – 447 – 447Amortisation of transaction costs 2,784 2,284 2,482 1,857Trustee’s fees 454 544 454 544Donation of non-Shari’ah compliant income 113 63 113 63Net change in fair value of financial derivatives 235 (2,259) 237 (1,660)Net change in fair value of investment properties 90,862 116,708 90,862 116,708Loss on divestment of investment properties 558 – 558 –Loss on exercise of put option on Convertible

Sukuk by Sukukholders – 648 – 227Effects of recognising rental income on a

straight line basis over the lease term (362) (369) (362) (369)Other items 503 494 507 496Net effect of non-tax deductible items 99,413 123,571 99,117 123,324Income available for distribution to

Unitholders 48,069 63,127 48,069 63,127

Distribution Statements



103


Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Distribution of 1.20 cents per Unit for the period 1 July 2016 to 30 September 2016 (8,877) – (8,877) –

Distribution of 1.23 cents per Unit for the period 1 April 2016 to 30 June 2016 (9,074) – (9,074) –

Distribution of 1.33 cents per Unit for the period 1 January 2016 to 31 March 2016 (9,786) – (9,786) –

Distribution of 1.50 cents per Unit for the period 1 October 2015 to 31 December 2015 (11,011) – (11,011) –

Distribution of 1.77 cents per Unit for the period 1 July 2015 to 30 September 2015 – (12,963) – (12,963)

Distribution of 1.80 cents per Unit for the period 1 April 2015 to 30 June 2015 – (13,151) – (13,151)

Distribution of 1.78 cents per Unit for the period 1 January 2015 to 31 March 2015 – (12,971) – (12,971)

Distribution of 1.78 cents per Unit for the period 1 October 2014 to 31 December 2014 – (12,922) – (12,922)

(38,748) (52,007) (38,748) (52,007)Income available for distribution to

Unitholders at end of the year 9,321 11,120 9,321 11,120

Number of Units entitled to distributions (‘000) (Note 13) 1,053,083 734,027 1,053,083 734,027

Distribution per Unit (cents)* 4.17 5.99 4.17 5.99

* Incorporates the effects of the rights issue (including effects of bonus element) undertaken by Sabana REIT in December 2016 and was completed in January 2017.

Distribution Statements (continued)



104


Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Unitholders’ funds at beginning of the year 653,741 772,585 653,203 771,800

OperationsTotal return after taxation and

before distribution (62,464) (73,436) (62,168) (73,189)591,277 699,149 591,035 698,611

Unitholders’ transactionsIssue of new Units:- Manager’s fees paid in Units 3,238 3,836 3,238 3,836- Manager’s fees payable in Units 1,028 1,175 1,028 1,175- Distribution Reinvestment Plan (“DRP”) – 1,628 – 1,628Issue expenses – (40) – (40)Distributions to Unitholders (38,748) (52,007) (38,748) (52,007)Net decrease in net assets resulting from

Unitholders’ transactions (34,482) (45,408) (34,482) (45,408)Unitholders’ funds at end of the year 556,795 653,741 556,553 653,203

Statements of Movements in Unitholders’ Funds



105


Group

Description of property Type Leasehold term LocationCommitted occupancy

rate as atCarrying values

as at% of total net assets

as at31

December 2016

31 December

2015

31 December

2016

31 December

2015

31 December

2016

31 December

2015% % $’000 $’000 % %

New Tech Park High-tech industrial 45 years with effect from ("wef") 26 November 2010

151 Lorong Chuan 88 87 316,000 339,500 56.8 51.8

8 Commonwealth Lane High-tech industrial 30 years wef 1 February 2006(1) 8 Commonwealth Lane 81 76 57,000 67,500 10.2 10.3

Geo-Tele Centre High-tech industrial 30 years wef 1 June 1995(2) 9 Tai Seng Drive 100 100 41,000 45,300 7.4 6.9

Pantech 21* High-tech industrial 99 years wef 27 January 1984 200 Pandan Loop – 53 – 38,000(10) – 5.8

Frontech Centre High-tech industrial 99 years wef 1 January 1962 15 Jalan Kilang Barat 92 78 23,000 24,000 4.1 3.7

1 Tuas Avenue 4 High-tech industrial 30 years wef 1 January 1996(3) 1 Tuas Avenue 4 100 100 32,400 32,200 5.8 4.9

BTH Centre High-tech industrial 30 years wef 16 September 2006(4) 23 Serangoon North Avenue 5

31 55 41,000 48,100 7.4 7.4

508 Chai Chee Lane High-tech industrial 30 years wef 16 April 2001(5) 508 Chai Chee Lane 72 56 56,800 60,900 10.2 9.3

Freight Links Express Logisticpark Chemical warehouse & logistics

30 years wef 16 February 1988(6) 33 & 35 Penjuru Lane 100 100 60,000 66,400 10.8 10.2

18 Gul Drive Chemical warehouse & logistics

13 years 10 months 12 days wef 1 November 2004(7)

18 Gul Drive 100 100 24,500 27,300 4.4 4.2

Penjuru Logistics Hub Warehouse & logistics 30 years wef 16 August 2002 34 Penjuru Lane 84 91 40,700 46,400 7.3 7.1

Freight Links Express Logisticentre

Warehouse & logistics 30 years wef 1 January 1995(2) 51 Penjuru Road 100 100 46,800 47,800 8.4 7.3

26 Loyang Drive Warehouse & logistics 30 years wef 1 January 2006(8) 26 Loyang Drive 100 100 24,700 28,100 4.4 4.3

Balance carried forward 763,900 871,500 137.2 133.2


Consolidated Portfolio StatementAs at 31 December 2016

106


Group




as at31

December 2016

31 December

2015

31 December

2016

31 December

2015

31 December

2016

31 December

2015% % $’000 $’000 % %

New Tech Park High-tech industrial 45 years with effect from ("wef") 26 November 2010

151 Lorong Chuan 88 87 316,000 339,500 56.8 51.8

8 Commonwealth Lane High-tech industrial 30 years wef 1 February 2006(1) 8 Commonwealth Lane 81 76 57,000 67,500 10.2 10.3

Geo-Tele Centre High-tech industrial 30 years wef 1 June 1995(2) 9 Tai Seng Drive 100 100 41,000 45,300 7.4 6.9

Pantech 21* High-tech industrial 99 years wef 27 January 1984 200 Pandan Loop – 53 – 38,000(10) – 5.8

Frontech Centre High-tech industrial 99 years wef 1 January 1962 15 Jalan Kilang Barat 92 78 23,000 24,000 4.1 3.7

1 Tuas Avenue 4 High-tech industrial 30 years wef 1 January 1996(3) 1 Tuas Avenue 4 100 100 32,400 32,200 5.8 4.9

BTH Centre High-tech industrial 30 years wef 16 September 2006(4) 23 Serangoon North Avenue 5

31 55 41,000 48,100 7.4 7.4

508 Chai Chee Lane High-tech industrial 30 years wef 16 April 2001(5) 508 Chai Chee Lane 72 56 56,800 60,900 10.2 9.3

Freight Links Express Logisticpark Chemical warehouse & logistics

30 years wef 16 February 1988(6) 33 & 35 Penjuru Lane 100 100 60,000 66,400 10.8 10.2

18 Gul Drive Chemical warehouse & logistics

13 years 10 months 12 days wef 1 November 2004(7)

18 Gul Drive 100 100 24,500 27,300 4.4 4.2

Penjuru Logistics Hub Warehouse & logistics 30 years wef 16 August 2002 34 Penjuru Lane 84 91 40,700 46,400 7.3 7.1

Freight Links Express Logisticentre

Warehouse & logistics 30 years wef 1 January 1995(2) 51 Penjuru Road 100 100 46,800 47,800 8.4 7.3

26 Loyang Drive Warehouse & logistics 30 years wef 1 January 2006(8) 26 Loyang Drive 100 100 24,700 28,100 4.4 4.3

Balance carried forward 763,900 871,500 137.2 133.2

107


Group (continued)




as at31

December 2016

31 December

2015

31 December

2016

31 December

2015

31 December

2016

31 December

2015% % $’000 $’000 % %

Balance brought forward 763,900 871,500 137.2 133.2

Fong Tat Building* Warehouse & logistics 30 years wef 1 May 1995(2) 3 Kallang Way 2A – 100 – 16,600(10) – 2.5

218 Pandan Loop* Warehouse & logistics 30 years wef 16 September 1989(2) 218 Pandan Loop – – 13,000(10) 13,600 2.3 2.1

3A Joo Koon Circle Warehouse & logistics 30 years wef 1 August 1987(2) 3A Joo Koon Circle 100 100 39,000 41,000 7.0 6.3

2 Toh Tuck Link Warehouse & logistics 30 years wef 16 December 1996(2) 2 Toh Tuck Link 87 98 32,300 35,100 5.8 5.4

10 Changi South Street 2 Warehouse & logistics 30 years wef 1 October 1994(9) 10 Changi South Street 2 100 100 52,100 52,800 9.4 8.0

Yenom Industrial Building General industrial 60 years wef 1 September 1981 123 Genting Lane 79 84 18,200 18,700 3.3 2.9

30 & 32 Tuas Avenue 8 General industrial 30 years wef 1 September 1996(2) 30 & 32 Tuas Avenue 8 100 100 29,000 29,300 5.2 4.5

39 Ubi Road 1 General industrial 30 years wef 1 January 1992(2) 39 Ubi Road 1 63 100 23,000 33,200 4.1 5.1

21 Joo Koon Crescent General industrial 30 years wef 16 February 1994(2) 21 Joo Koon Crescent 100 100 19,000 18,700 3.4 2.9

6 Woodlands Loop General industrial 30 years wef 16 September 1994(2) 6 Woodlands Loop 100 100 14,100 14,300 2.5 2.2

Investment properties and investment properties held for divestment 1,003,600 1,144,800 180.2 175.1

Other assets and liabilities (net) (446,805) (491,059) (80.2) (75.1)

Net assets 556,795 653,741 100.0 100.0


Consolidated Portfolio Statement (continued)As at 31 December 2016

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Group (continued)




as at31

December 2016

31 December

2015

31 December

2016

31 December

2015

31 December

2016

31 December

2015% % $’000 $’000 % %

Balance brought forward 763,900 871,500 137.2 133.2

Fong Tat Building* Warehouse & logistics 30 years wef 1 May 1995(2) 3 Kallang Way 2A – 100 – 16,600(10) – 2.5

218 Pandan Loop* Warehouse & logistics 30 years wef 16 September 1989(2) 218 Pandan Loop – – 13,000(10) 13,600 2.3 2.1

3A Joo Koon Circle Warehouse & logistics 30 years wef 1 August 1987(2) 3A Joo Koon Circle 100 100 39,000 41,000 7.0 6.3

2 Toh Tuck Link Warehouse & logistics 30 years wef 16 December 1996(2) 2 Toh Tuck Link 87 98 32,300 35,100 5.8 5.4

10 Changi South Street 2 Warehouse & logistics 30 years wef 1 October 1994(9) 10 Changi South Street 2 100 100 52,100 52,800 9.4 8.0

Yenom Industrial Building General industrial 60 years wef 1 September 1981 123 Genting Lane 79 84 18,200 18,700 3.3 2.9

30 & 32 Tuas Avenue 8 General industrial 30 years wef 1 September 1996(2) 30 & 32 Tuas Avenue 8 100 100 29,000 29,300 5.2 4.5

39 Ubi Road 1 General industrial 30 years wef 1 January 1992(2) 39 Ubi Road 1 63 100 23,000 33,200 4.1 5.1

21 Joo Koon Crescent General industrial 30 years wef 16 February 1994(2) 21 Joo Koon Crescent 100 100 19,000 18,700 3.4 2.9

6 Woodlands Loop General industrial 30 years wef 16 September 1994(2) 6 Woodlands Loop 100 100 14,100 14,300 2.5 2.2

Investment properties and investment properties held for divestment 1,003,600 1,144,800 180.2 175.1

Other assets and liabilities (net) (446,805) (491,059) (80.2) (75.1)

Net assets 556,795 653,741 100.0 100.0

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Group (continued)

As disclosed in the Statement of Financial Position:

Carrying values as at31 December

201631 December

2015$’000 $’000

Investment properties – non-current 990,600 1,090,200Investment properties held for divestment – current (denoted as * in the Consolidated Portfolio Statement) 13,000 54,600

1,003,600 1,144,800

(1) The Trust has an option to renew the land lease term for a further term of 23 years upon expiry.(2) The Trust has an option to renew the land lease term for a further term of 30 years upon expiry.(3) The Trust has an option to renew the land lease term for a further term of 21 years and 4 months upon expiry.(4) The Trust has an option to renew the land lease term for a further term of 20 years and 15 days upon expiry.(5) The Trust has an option to renew the land lease term for a further term of 29 years upon expiry.(6) The Trust has an option to renew the land lease term for a further term of 31 years upon expiry.(7) The Trust has an option to renew the land lease term for a further term of 20 years upon expiry.(8) The Trust has an option to renew the land lease term for a further term of 18 years upon expiry.(9) The Trust has an option to renew the land lease term for a further term of 27 years upon expiry.(10) These properties were transferred to investment properties held for divestment, following the proposed divestment of the properties.

The carrying amounts of the investment properties as at 31 December 2016 were based on independent valuations undertaken by Colliers International Consultancy & Valuation (Singapore) Pte Ltd, Savills Valuation and Professional Services (S) Pte Ltd and Suntec Real Estate Consultants Pte Ltd (2015: Knight Frank Pte Ltd and DTZ Debenham Tie Leung (SEA) Pte Ltd). Valuations are determined in accordance with the Trust Deed, which requires the investment properties to be valued by independent registered valuers at least once a year, in accordance with the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore.

The carrying amount of the investment properties held for divestment as at 31 December 2016 were based on independent valuations undertaken by Suntec Real Estate Consultants Pte Ltd (2015: were based on their respective sale consideration to be received upon divestment).

Investment properties comprise properties used for the purpose of high-tech industrial, chemical warehouse and logistics, warehouse and logistics and general industrial use. Generally, the leases contain an initial non-cancellable period of three to ten years. Subsequent renewals are negotiated with the lessees. 9 Tai Seng Drive, 151 Lorong Chuan, 8 Commonwealth Lane, 123 Genting Lane, 508 Chai Chee Lane, 2 Toh Tuck Link, 23 Serangoon North Avenue 5, 34 Penjuru Lane, 15 Jalan Kilang Barat and 39 Ubi Road 1 are leased on individual lease agreements, 218 Pandan Loop is currently vacant, pending divestment, and the other investment properties are leased on master lease agreements.


Consolidated Portfolio Statement (continued)As at 31 December 2016

110


GroupNote 2016 2015

$’000 $’000

Cash flows from operating activitiesTotal return for the year after taxation and before distribution (62,464) (73,436)Adjustments for:Amortisation of intangible assets – 447Manager’s fees paid/payable in Units A(i) 4,266 5,011Net change in fair value of financial derivatives 235 (2,259)Net change in fair value of investment properties 90,862 116,708Loss on exercise of put option on Convertible Sukuk by Sukukholders – 648Loss on divestment of investment properties 558 –Net finance costs 20,796 21,418

54,253 68,537Change in trade and other receivables (2,235) (1,039)Change in trade and other payables (3,604) 2,438Cash generated from operations 48,414 69,936Ta’widh (compensation on late payment of rent) received 263 65Net cash from operating activities 48,677 70,001

Cash flows from investing activitiesCapital expenditure on investment properties (1,830) (1,455)Divestment of investment properties 54,600 –Profit income received from Islamic financial institutions 30 65Net cash from/(used in) investing activities 52,800 (1,390)

Cash flows from financing activitiesProceeds from borrowings 115,200 29,500Repayment of borrowings (159,900) (29,750)Issue expenses paid – (40)Transaction costs paid (1,244) (446)Finance costs paid (18,017) (19,345)Distributions paid A(ii) (38,748) (50,379)Net cash used in financing activities (102,709) (70,460)

Net decrease in cash and cash equivalents (1,232) (1,849)Cash and cash equivalents at beginning of the year 10,438 12,287Cash and cash equivalents at end of the year 8 9,206 10,438

Consolidated Statement of Cash Flows



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(A) Significant Non-Cash Transactions

There were the following significant non-cash transactions:

(i) 8,344,623 (2015: 6,232,961) Units, of which 5,764,396 (2015: 4,587,334) Units were issued and another 2,580,227 (2015: 1,645,627) Units will be issued to the Manager by the Trust, amounting to approximately $4,266,000 (2015: $5,011,000) at various Unit prices in satisfaction of Manager’s fee payable in respect of the year ended 31 December 2016.

(ii) 1,811,131 Units amounting to approximately $1,628,000 (net of withholding tax) were issued by the Trust as part payment of distributions in respect of the period from 1 October 2014 to 30 September 2015, pursuant to the DRP. There was no DRP applied for the period from 1 October 2015 to 30 September 2016.

Consolidated Statement of Cash Flows (continued)For the year ended 31 December 2016


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These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Manager and the Trustee on 15 March 2017.

1 GENERAL

Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (the “Trust”) is a Singapore-domiciled unit trust constituted pursuant to the trust deed dated 29 October 2010 (as amended by the First Supplemental Deed dated 2 December 2010, the First Amending and Restating Deed dated 24 February 2016 and the Second Amending and Restating Deed dated 24 March 2016) (collectively, the “Trust Deed”) between Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”) and HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”). The Trust Deed is governed by the laws of the Republic of Singapore. The Trustee is under a duty to take into custody and hold the assets of the Trust held by it or through its subsidiaries (collectively, the “Group”) in trust for the holders (“Unitholders”) of units in the Trust (the “Units”).

The Trust was a dormant private trust from the date of constitution until its acquisition of properties on 26 November 2010. It was formally admitted to the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) on 26 November 2010 and was included in the Central Provident Fund (“CPF”) Investment Scheme on 26 November 2010.

The financial statements of the Group as at and for the year ended 31 December 2016 comprise the Trust and its subsidiaries (together referred to as the “Group” and individually as “Group entities”).

The principal activity of the Trust is to invest in income producing real estate used for industrial purposes in Asia, as well as real estate-related outlets, in line with Shari’ah investment principles. The principal activities of the subsidiaries are set out on Note 6 of the financial statements.

The Trust has entered into several service agreements in relation to the management of the Trust and its property operations. The fee structures of these services are as follows:

1.1 Property Manager’s fees

The Property Manager is entitled under the Property Management Agreement to the following management fees on each property of the Group located in Singapore under its management:

• a property management fee of 2.0% per annum of gross revenue of each property; and

• a lease management fee of 1.0% per annum of gross revenue of each property.

The property management fee and the lease management fee are payable to the Property Manager in the form of cash.

Notes to the Financial StatementsFor the year ended 31 December 2016

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1 GENERAL (CONTINUED)

1.2 Manager’s fees

Pursuant to the Trust Deed, the Manager is entitled to the following manager’s fees:

• a base fee not exceeding the rate of 0.5% per annum of the value of the gross assets of the Group (“Deposited Property”); and

• a performance fee equal to 0.5% per annum (or such lower percentage as may be determined by the Manager in its absolute discretion) of the Group’s Net Property Income in the relevant financial year, provided that the Group achieves an annual growth in distribution per Unit (“DPU”) of at least 10.0% over the previous financial year (calculated after accounting for the performance fee (if any) for that financial year and after adjusting, at the discretion of the Manager, for any new Units arising from the conversion or exercise of any instruments convertible into Units which are outstanding at the time of calculation, and any rights or bonus issue, consolidation, subdivision or buy-back of Units).

The Manager may, at its sole discretion, elect to receive the base fee and performance fee in cash or Units or a combination of cash and Units.

1.3 Trustee’s fees

Pursuant to the Trust Deed, the Trustee’s fee shall not exceed 0.25% per annum of the value of the Deposited Property (subject to a minimum of $25,000 per month), excluding out-of-pocket expenses and goods and services tax (“GST”).

The actual fee payable will be determined between the Manager and the Trustee from time to time.

1.4 Acquisition fees

Pursuant to the Trust Deed, the Manager is entitled to acquisition fees of 1.0% (or such lower percentage as may be determined by the Manager), of each of the following:

• the acquisition price of any real estate purchased, whether directly or indirectly through one or more Special Purpose Vehicles (“SPVs”) by the Trust;

• the underlying value of any real estate which is taken into account when computing the acquisition price payable for the equity interests of any holding directly or indirectly the real estate, purchased whether directly or indirectly through one or more SPVs, by the Trust; and

• the acquisition price of any investment purchased by the Trust, whether directly or indirectly through one or more SPVs, in any debt securities in any property corporation or other SPV owning or acquiring real estate or any debt securities which are secured directly or indirectly by the rental income from real estate.


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1 GENERAL (CONTINUED)

1.4 Acquisition fees (continued)

The Manager may, at its sole discretion, elect to receive the acquisition fee in cash or Units or a combination of cash and Units. In respect of any acquisition of real estate assets from interested parties, such a fee should be in the form of Units issued by the Trust. Such Units should not be sold within one year from the date of their issuance.

1.5 Divestment fees

Pursuant to the Trust Deed, the Manager is entitled to divestment fees of 0.5% (or such lower percentage as may be determined by the Manager) of each of the following:

• the sale price of real estate sold or divested, whether directly or indirectly through one or more SPVs by the Trust;

• the underlying value of any real estate which is taken into account when computing the sale price for the equity interests of any holding directly or indirectly the real estate, divested whether directly or indirectly through one or more SPVs, by the Trust; and

• the sale price of any investment sold by the Trust, whether directly or indirectly through one or more SPVs, in any debt securities in any property corporation or other SPV owning or acquiring real estate or any debt securities which are secured directly or indirectly by the rental income from real estate.

The Manager may, at its sole discretion, elect to receive the divestment fee in cash or Units or a combination of cash and Units. In respect of any divestment of real estate assets to interested parties, such a fee should be in the form of Units issued by the Trust. Such Units should not be sold within one year from the date of their issuance.

2 BASIS OF PREPARATION

2.1 Statement of compliance

The financial statements have been prepared in accordance with the Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” (“RAP 7”) issued by the Institute of Singapore Chartered Accountants (“ISCA”), and the applicable requirements of the Code on Collective Investment Schemes (the “CIS Code”) issued by the Monetary Authority of Singapore (“MAS”) and the provisions of the Trust Deed. RAP 7 requires the accounting policies to generally comply with the recognition and measurement principles of Singapore Financial Reporting Standards (“FRS”).


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2 BASIS OF PREPARATION (CONTINUED)

2.2 Basis of measurement

The financial statements have been prepared on a historical cost basis except for the investment properties and financial derivatives which are stated at fair value as set out in the accounting policies described below.

2.3 Functional and presentation currency

These financial statements are presented in Singapore dollars which is the Trust’s functional currency. All financial information presented in Singapore dollars have been rounded to the nearest thousand, unless otherwise stated.

2.4 Use of estimates and judgements

The preparation of the financial statements in conformity with RAP 7 (2012) requires the Manager to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In particular, information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

• Note 4 – valuation of investment properties

• Note 24 – valuation of financial instruments

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities.


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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1 Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition method in accordance with FRS 103 Business Combinations as at the acquisition date, which is the date on which control is transferred to the Group.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the Statement of Total Return.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

(iii) Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the Statement of Total Return. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

(iv) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(v) Subsidiaries in the separate financial statements

Investments in subsidiaries are stated in the Trust’s Statement of Financial Position at cost less accumulated impairment losses.


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3.2 Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective profit rate and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on translation are recognised in the Statement of Total Return, except for differences arising on the translation of monetary items that in substance form part of the Group’s net investment in a foreign operation.

3.3 Investment properties

Investment properties are properties held either to earn rental income or capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

Investment properties are measured at cost at initial recognition and subsequently at fair value with any changes therein recognised in the Statement of Total Return.

Fair value is determined in accordance with the Trust Deed, which requires the investment properties to be valued by independent registered valuers in such manner and frequency required under Appendix 6 of the CIS Code issued by the MAS (“Property Funds Appendix”).

Fair value changes are recognised in the Statement of Total Return. When an investment property is disposed of, the resulting gain or loss is recognised in the Statement of Total Return as the difference between net disposal proceeds and the carrying amount of the property.

Subsequent expenditure relating to investment properties that have already been recognised is added to the carrying amount of the assets when it is probable that future economic benefits, in excess of originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

Investment properties are not depreciated. The properties are subject to continuing maintenance and are regularly revalued on the basis described above. For taxation purpose, the Group may claim capital allowances on assets that qualify as plant and machinery under the Singapore Income Tax Act.


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3.4 Non-current assets held for sale

Non-current assets comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets and liabilities are measured in accordance with applicable FRSs. Thereafter, the assets or disposal group, are generally measured at the lower of their carrying amount and fair value less costs to sell except for non-current assets that are accounted for in accordance with the fair value model in FRS 40 Investment Property.

Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in the Statement of Total Return. Gains are not recognised in excess of any cumulative impairment loss.

Non-current assets held for sale comprise investment properties held for divestment.

3.5 Intangible assets

Intangible assets represent the unamortised income support receivable by the Group in accordance with the purchase agreements, entered into with the vendors of 9 Tai Seng Drive and 6 Woodlands Loop.

These intangible assets have finite useful lives and are measured at cost less accumulated amortisation and accumulated impairment losses.

These intangible assets are amortised in the Statement of Total Return on a systematic basis over their estimated useful lives of 3 years to 5 years. Intangible assets are tested for impairment as described in Note 3.7.

3.6 Financial instruments

(i) Non-derivative financial assets

The Group initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.


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3.6 Financial instruments (continued)

(i) Non-derivative financial assets (continued)

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial assets: loans and receivables.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective profit rate method, less any impairment losses.

Loans and receivables comprise cash and cash equivalents and trade and other receivables.

Cash and cash equivalents comprise cash at bank and short-term deposits with financial institutions that are subject to an insignificant risk of changes in their fair value.

(ii) Non-derivative financial liabilities

The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are initially recognised on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective profit rate method.

Other financial liabilities comprise borrowings and trade and other payables.


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3.6 Financial instruments (continued)

(iii) Derivative financial instruments

The Group holds derivative financial instruments to economically hedge its profit rate risk exposure.

Derivatives are recognised initially at fair value; any attributable transaction costs are recognised in the Statement of Total Return as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Separable embedded derivatives

Changes in the fair value of separated embedded derivatives are recognised immediately in the Statement of Total Return.

Other non-trading derivatives

Changes in the fair value of the derivative hedging instruments that do not qualify for hedge accounting are recognised immediately in the Statement of Total Return.

(iv) Convertible Sukuk

The Convertible Sukuk comprises a liability for the profit expense and principal amount and an embedded derivative liability. The embedded derivative liability is recognised at fair value at inception. The carrying amount of the Convertible Sukuk at initial recognition is the difference between the gross proceeds from the Convertible Sukuk and the fair value of the embedded derivative liability. Any directly attributable transaction costs are allocated to the debt component of the Convertible Sukuk and embedded derivative liability in proportion to their initial carrying amounts.

Subsequent to initial recognition, the debt component of the Convertible Sukuk is measured at amortised cost using the effective profit rate method. The embedded derivative liability is measured at fair value through the Statement of Total Return.


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3.7 Impairment

(i) Non-derivative financial assets

A financial asset not carried at fair value through Statement of Total Return is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event has a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security.

Loans and receivables

The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the asset’s original effective profit rate. Losses are recognised in the Statement of Total Return and reflected in an allowance account against loans and receivables. Profit income on the impaired asset continues to be recognised. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through the Statement of Total Return.

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than investment properties, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its estimated recoverable amount.


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3.7 Impairment (continued)

(ii) Non-financial assets (continued)

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU.

Impairment losses are recognised in the Statement of Total Return. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

3.8 Issue expenses

Issue expenses relate to expenses incurred in connection with the issue of Units. Such expenses are deducted directly against Unitholders’ funds.

3.9 Revenue recognition

Rental income from operating leases

Rental income receivable under operating leases from investment properties is recognised in the Statement of Total Return on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives granted are recognised as an integral part of total rental to be received. Contingent rentals are recognised as income in the accounting period on a receipt basis. No contingent rentals are recognised if there are uncertainties due to the possible return of amounts received.


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3.10 Expenses

(i) Property expenses

Included in property expenses are property management fee and lease management fee under the Property Manager Agreement, which are based on the applicable formula stipulated in Note 1.1, reimbursable expenses payable to the Property Manager and other property expenses in relation to the investment properties.

Property expenses are recognised as and when incurred and recorded on an accrual basis.

(ii) Manager’s fees

Manager’s fees are recognised as and when services are rendered and recorded on an accrual basis using the applicable formula stipulated in Note 1.2.

(iii) Trustee’s fees

Trustee’s fees are recognised as and when services are rendered and recorded on an accrual basis using the applicable formula stipulated in Note 1.3.

3.11 Finance income and finance costs

Finance income comprises mainly profit income. Profit income is recognised as it accrues in the Statement of Total Return using the effective profit rate method.

Finance costs comprise profit expense on borrowings and profit rate swaps, amortisation of transaction costs incurred on borrowings and brokerage and agent fees. All borrowing costs are recognised in the Statement of Total Return using the effective profit rate method.

3.12 Tax

Tax expense comprises current and deferred tax. Current and deferred tax is recognised in the Statement of Total Return except to the extent that it relates to a business combination, or items directly related to Unitholders’ funds, in which case it is recognised in Unitholders’ funds.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.


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3.12 Tax (continued)

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and

• temporary differences related to investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future.

The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For investment property that is measured at fair value, the presumption that the carrying amount of the investment property will be recovered through sale has not been rebutted. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.


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The Inland Revenue Authority of Singapore (“IRAS”) had issued a tax ruling on the taxation of the Trust for income earned and expenditure incurred after its listing on the SGX-ST. Subject to meeting the terms and conditions of the tax ruling issued by IRAS, the Trustee is not subject to tax on the taxable income of the Trust, which includes profit distributions from liquid Islamic debt securities such as Sukuk that the Trust may invest in, provided that at least 90% of the taxable income of the Trust is distributed within the year in which the income is derived (the “tax transparency treatment”). Instead, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate (currently 17%) from the distributions made to Unitholders that are made out of the taxable income of the Trust, except:

(i) where the beneficial owners are individuals (whether resident or non-resident) who receive such distributions as investment income (excluding income received through a partnership) or Qualifying Unitholders, the Trustee and the Manager will make the distributions to such Unitholders without deducting any income tax; or

(ii) where the beneficial owners are Qualifying Foreign Non-Individual Unitholders, the Trustee and the Manager will deduct Singapore income tax at the reduced rate of 10% for distributions made up to 31 March 2020, unless concession is extended.

A Qualifying Unitholder is a Unitholder who is:

• A Singapore-incorporated company which is a tax resident in Singapore;

• A body of persons, other than a company or a partnership, registered or constituted in Singapore (for example, a town council, a statutory board, a registered charity, a registered co-operative society, a registered trade union, a management corporation, a club and a trade and industry association); and

• A Singapore branch of a foreign company which has presented a letter of approval from the IRAS granting a waiver from tax deduction at source in respect of distributions from the Trust.


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A Qualifying Foreign Non-Individual Unitholder is one which is not a resident of Singapore for income tax purposes and:

• who does not have a permanent establishment in Singapore; or

• who carries on any operation in Singapore through a permanent establishment in Singapore where the funds used to acquire the Units are not obtained from that operation in Singapore.

The above tax transparency ruling does not apply to gains or profits from sale of real estate properties, if considered to be trading gains derived from a trade or business carried on by the Trust. Tax on such gains or profits will be assessed, in accordance with section 10(1)(a) of the Income Tax Act, Chapter 134 of Singapore and collected from the Trustee. Where the gains or profits are capital gains, they are not subject to tax and the Trustee and the Manager may distribute the capital gains without tax being deducted at source.

3.13 Earnings per Unit

The Group presents basic and diluted earnings per Unit (“EPU”) data for its Units. Basic EPU is calculated by dividing the total return attributable to Unitholders of the Group by the weighted average number of ordinary Units outstanding during the year. Diluted EPU is determined by adjusting the total return attributable to Unitholders and the weighted average number of Units outstanding for the effects of all dilutive potential Units.

3.14 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Manager’s CEO (the chief operating decision maker) to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Manager’s CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.


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3.15 New standards and interpretations not adopted

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2016 and earlier application is permitted; however, the Group has not early applied the following new or amended standards in preparing these statements.

Applicable to financial statements for the year ending 31 December 2017

Revision to RAP 7

RAP 7 was revised in June 2016 ("Revised RAP 7") to take into account, amongst others, the changes made to FRS 32 Financial Instruments: Presentation and FRS 107 Financial Instruments: Disclosures in relation to the offsetting of financial assets and liabilities; and new standards issued after 2012 including FRS 110 Consolidated Financial Statements, FRS 112 Disclosure of Interest in Other Entities and FRS 113 Fair Value Measurement. Revised RAP 7 is applicable to unit trusts with annual periods beginning on or after 1 July 2016. Certain additional disclosures would be required by the Revised RAP 7.


FRS 115 Revenue from Contracts with Customers

FRS 115 Revenue from Contracts with Customers establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It also introduces new cost guidance which requires certain costs of obtaining and fulfilling contracts to be recognised as separate assets when specified criteria are met.

When effective, FRS 115 Revenue from Contracts with Customers replaces existing revenue recognition guidance, including FRS 18 Revenue, FRS 11 Construction Contracts, INT FRS 113 Customer Loyalty Programmes, INT FRS 115 Agreements for the Construction of Real Estate, INT FRS 118 Transfers of Assets from Customers and INT FRS 31 Revenue – Barter Transactions Involving Advertising Services.

FRS 115 Revenue from Contracts with Customers is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. FRS 115 Revenue from Contracts with Customers offers a range of transition options including full retrospective adoption where an entity can choose to apply the standard to its historical transactions and retrospectively adjust each comparative period presented in its financial statements for the year ending 31 December 2018. When applying the full retrospective method, an entity may also elect to use a series of practical expedients to ease transition.

Potential impact on the financial statements

The Group does not expect the impact on the financial statements to be significant. Certain additional disclosures would be required by FRS 115 Revenue from Contracts with Customers.


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3.15 New standards and interpretations not adopted (continued)

Applicable to financial statements for the year ending 31 December 2018 (continued)

FRS 109 Financial Instruments

FRS 109 Financial Instruments replaces most of the existing guidance in FRS 39 Financial Instruments: Recognition and Measurement. It includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from FRS 39 Financial Instruments: Recognition and Measurements.

FRS 109 Financial Instruments is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. Retrospective application is generally required, except for hedge accounting. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. Restatement of comparative information is not mandatory. If comparative information is not restated, the cumulative effect is recorded in opening equity as at 1 January 2018.


Overall, the Group does not expect a significant impact on its opening Unitholders’ funds. The Group’s initial assessment of the three elements of FRS 109 Financial Instruments is as described below.

Classification and measurement

The Group does not expect a significant change to the measurement basis arising from adopting the new classification and measurement model under FRS 109 Financial Instruments.

Loans and receivables that are currently accounted for at amortised cost will continue to be accounted for using amortised cost model under FRS 109 Financial Instruments.

For derivative instruments currently held at fair value, the Group expects to continue measuring most of these derivative instruments at fair value under FRS 109 Financial Instruments.


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FRS 109 Financial Instruments (continued)

Impairment

The Group plans to apply the simplified approach and record lifetime expected impairment losses on all trade receivables. On adoption of FRS 109 Financial Instruments, the Group does not expect a significant increase in the impairment loss allowance.

Transition

The Group plans to adopt the standard when it becomes effective for the year ending 31 December 2018 without restating comparative information; and is gathering data to quantifying the potential impact arising from the adoption.


FRS 116 Leases

FRS 116 Leases eliminates the lessee’s classification of leases as either operating leases or finance leases and introduces a single lessee accounting model. Applying the new model, a lessee is required to recognise right-of-use ("ROU") assets and lease liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.

FRS 116 Leases substantially carries forward the lessor accounting requirements in FRS 17 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for these two types of leases using the FRS 17 Leases operating lease and finance lease accounting models respectively. However, FRS 116 Leases requires more extensive disclosures to be provided by a lessor. When effective, FRS 116 Leases replaces existing lease accounting guidance, including FRS 17 Leases, INT FRS 104 Determining whether an Arrangement contains a Lease, INT FRS 15 Operating Leases – Incentives, and INT FRS 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

FRS 116 Leases is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted if FRS 115 Revenue from Contracts with Customers is also applied.


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FRS 116 Leases (continued)


The Group has performed a preliminary high-level assessment of the new standard on its existing operating lease arrangements as a lessee. Based on the preliminary assessment, the Group expects these operating leases to be recognized as ROU assets with corresponding lease liabilities under the new standard.

The Group plans to adopt the standard when it becomes effective for the year ending 31 December 2019. The Group will perform a detailed analysis of the standard, including the transition options and practical expedients in 2017.

4 INVESTMENT PROPERTIES AND INVESTMENT PROPERTIES HELD FOR DIVESTMENT

Investment properties

Group and Trust2016 2015$’000 $’000

At 1 January 1,090,200 1,260,053Transfer to investment properties held for divestment (13,000) (54,600)Capital expenditure on investment properties 1,830 1,455Net change in fair value of investment properties* (88,430) (116,708)At 31 December 990,600 1,090,200

* The fair value loss of $88.4 million (2015: $116.7 million), together with an adjustment of $2.5 million (2015: $Nil) to recognise rental income on a straight line basis in accordance with FRS 17 Leases, aggregated to $90.9 million (2015: $116.7 million) as disclosed in the Statement of Total Return.

Investment properties held for divestment

An investment property (2015: Two investment properties) with carrying values of $13,000,000 (2015: $54,600,000) as at 31 December 2016 were transferred to investment properties held for divestment, following the proposed divestment to third parties.


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4 INVESTMENT PROPERTIES AND INVESTMENT PROPERTIES HELD FOR DIVESTMENT (CONTINUED)

Security

As at 31 December 2016, investment properties of the Group and the Trust with an aggregate carrying values of $672,100,000 (2015: $767,400,000) have been pledged as security to secure certain borrowing facilities (see Note 10).

Measurement of fair value

Investment properties

Investment properties are stated at fair value based on valuations performed by independent professional valuers having appropriate recognised professional qualifications and recent experience in the location and category of property being valued. The fair values are based on open market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and willing seller in an arm’s length transaction wherein the parties had each acted knowledgeably, prudently and without compulsion.

In determining the fair value, the valuers have used valuation techniques which involve certain estimates. In relying on the valuation reports, the Manager has exercised its judgement and is satisfied that the valuation methods and estimates are reflective of current market conditions. The valuation reports are prepared in accordance with recognised appraisal and valuation standards. The estimates underlying the valuation techniques in the next financial year may differ from current estimates, which may result in valuations that may be materially different from the valuations as at the reporting date.

The valuers have considered the capitalisation approach, discounted cash flow method and direct comparison method in arriving at the open market value as at the reporting date. The capitalisation approach capitalises an income stream into a present value using single-year capitalisation rates. The income stream used is adjusted to market rentals currently being achieved within comparable investment properties and recent leasing transactions achieved within the investment properties. The discounted cash flow method involves the estimation and projection of an income stream over a period and discounting the income stream with an internal rate of return (“Discount Rate”) to arrive at the market value. The discounted cash flow method requires the valuers to assume a rental growth rate indicative of market and the selection of a Discount Rate consistent with current market requirements. The direct comparison method considered transacted prices of comparable properties.

Investment properties held for divestment

Investment properties held for divestment are stated at fair value based on valuations performed by independent professional valuers. In 2015, investment properties held for divestment are stated at fair value based on sale consideration agreed with third parties.


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Fair value hierarchy

The table below analyses investment properties and investment properties held for divestment carried at fair value. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Note Level 2 Level 3 Total$’000 $’000 $’000

Group and Trust2016Investment properties – 990,660 990,660

Investment properties held for divestment – 13,000 13,000

2015Investment properties – 1,090,200 1,090,200

Investment properties held for divestment (a) 54,600 – 54,600

(a) Transfers out of Level 3

In 2015, 200 Pandan Loop and 3 Kallang Way 2A, following the proposed divestment of these investment properties held for divestment, were based on their respective sale consideration to be received upon divestment. The fair value of these investment properties held for divestment were therefore reclassified to Level 2.

During the year ended 31 December 2016, there were no transfers from Level 1, Level 2 or Level 3, or vice versa.


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Fair value hierarchy (continued)

The following table shows the key unobservable inputs used in the valuation models for investment properties:

Type Key unobservable inputs

Inter-relationship between key unobservable inputs and fair value measurement

Industrial properties for leasing

• Discount rates (from 7.00% to 8.00% (2015: 7.50% to 8.25%))

• Capitalisation rates (from 5.50% to 7.00% (2015: 6.25% to 7.00%))

• Terminal yield (From 6.00% to 7.50% (2015: 6.50% to 7.25%))

The estimated fair value of investment properties would increase if the discount rates, capitalisation rates and terminal yield were lower.

5 INTANGIBLE ASSETS

Total$’000

Group and TrustCost At 1 January 2015 6,057Written off (6,057)At 31 December 2015 and at 31 December 2016 –

Accumulated amortisationAt 1 January 2015 5,610Amortisation for the year 447Written off (6,057)At 31 December 2015 and at 31 December 2016 –

Carrying amountsAt 1 January 2015 447At 31 December 2015 and at 31 December 2016 –

Intangible assets represent the unamortised income support receivable by the Group and the Trust in accordance with the purchase agreements entered into with the vendors of 9 Tai Seng Drive and 6 Woodlands Loop. As at 31 December 2015, the income support receivable under these agreements have been fully drawn down.


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6 SUBSIDIARIES

Trust2016 2015$’000 $’000

Equity investments at cost * *

* Less than $1,000

Details of the subsidiaries of the Group are as follows:

Name of subsidiary Principal activitiesCountry of

incorporation

Effective equity interest

held by the Group2016 2015

Sabana Treasury Pte. Ltd.(1) Provision of treasury services

Singapore 100% 100%

Sabana Sukuk Pte. Ltd.(1) Provision of treasury services

Singapore 100% 100%

(1) Audited by KPMG LLP Singapore

7 TRADE AND OTHER RECEIVABLES

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Trade receivables, gross 5,337 1,527 5,337 1,527Impairment losses on trade receivables (2,373) (20) (2,373) (20)Trade receivables, net 2,964 1,507 2,964 1,507

Other receivables, gross 4,739 7,006 4,739 7,006Impairment losses on other receivables (63) (63) (63) (63)Other receivables, net 4,676 6,943 4,676 6,943

Deposits 1,782 1,098 1,782 1,0989,422 9,548 9,422 9,548

Prepayments 139 210 131 2029,561 9,758 9,553 9,750

The Group’s and the Trust’s exposure to credit risk related to trade and other receivables, excluding prepayments, are disclosed in Note 15.


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8 CASH AND CASH EQUIVALENTS

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Bank balances 2,726 2,768 2,721 2,762Fixed deposits 6,480 7,670 6,480 7,670

9,206 10,438 9,201 10,432

The weighted average effective profit rate relating to cash and cash equivalents at the reporting date for the Group and the Trust is 0.45% (2015: 0.95%) per annum.

9 TRADE AND OTHER PAYABLES

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Amount due to related parties, trade 565 634 581 645Trade payables 1,277 1,452 1,277 1,452Security deposits 16,779 19,084 16,779 19,084Rental received in advance 215 657 215 657Retention sums 754 769 754 769Finance costs payable to:- non-related parties 3,560 3,449 986 880- subsidiaries – – 2,574 2,568Accrued operating expenses 2,652 2,432 2,652 2,432Others 1,806 1,889 1,788 1,872

27,608 30,366 27,606 30,359

Current 14,097 14,438 14,095 14,431Non-current 13,511 15,928 13,511 15,928

27,608 30,366 27,606 30,359

Outstanding balances with related parties are unsecured.

The Group’s and the Trust’s exposure to liquidity risk related to trade and other payables are disclosed in Note 15.


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10 BORROWINGS


$’000 $’000 $’000 $’000

Secured borrowingsCommodity Murabaha Facilities - Term 10(a) 195,000 195,000 195,000 195,000- Revolving 10(a) 13,300 30,000 13,300 30,000Revolving Murabahah Facility 10(b) – 28,000 – 28,000Less: Unamortised capitalised

transaction costs (1,962) (2,612) (1,962) (2,612)206,338 250,388 206,338 250,388

Unsecured borrowingsConvertible Sukuk – debt component 11 42,395 41,933 – –

Trust Certificates 10(c) 190,000 190,000 – –Loans from subsidiaries 10(d) – – 232,750 232,750Less: Unamortised capitalised

transaction costs (809) (1,237) (933) (1,521)189,191 188,763 231,817 231,229

437,924 481,084 438,155 481,617

Current 130,209 147,288 130,440 147,288Non-current 307,715 333,796 307,715 334,329

437,924 481,084 438,155 481,617


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10 BORROWINGS (CONTINUED)

Terms and borrowings repayment schedule

Terms and conditions of outstanding borrowings are as follows:

CurrencyNominal

profit rateYear of

maturityFace value

Carrying amount

% $’000 $’000Group

2016Term Commodity

Murabaha Facility F SGD *SOR+Margin 2017 75,000 74,514Term Commodity

Murabaha Facility C SGD *SOR+Margin 2019 30,000 29,480Term Commodity

Murabaha Facility B (2020) SGD *SOR+Margin 2020 90,000 89,044Revolving Commodity

Murabaha Facility D (2020) SGD *SOR+Margin 2020 13,300 13,300Convertible Sukuk – Debt

Component SGD 4.50% 2017 42,750 42,395Trust Certificate Series 1 SGD 4.00% 2018 90,000 89,753Trust Certificate Series 2 SGD 4.25% 2019 100,000 99,438

441,050 437,924

2015Term Commodity


Murabaha Facility D (2016) SGD *SOR+Margin 2016 30,000 30,000Term Commodity


Murabaha Facility C SGD *SOR+Margin 2019 30,000 29,313Revolving Murabahah Facility SGD *SOR+Margin 2018 28,000 27,600Convertible Sukuk – Debt

Component SGD 4.50% 2017 42,750 41,933Trust Certificate Series 1 SGD 4.00% 2018 90,000 89,558Trust Certificate Series 2 SGD 4.25% 2019 100,000 99,205

485,750 481,084

* Swap Offer Rate


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Terms and borrowings repayment schedule (continued)

CurrencyNominal

profit rateYear of

maturityFace value

Carrying amount

% $’000 $’000Trust

2016Term Commodity


Murabaha Facility C SGD *SOR+Margin 2019 30,000 29,480Term Commodity


Murabaha Facility D (2020) SGD *SOR+Margin 2020 13,300 13,300Loan from a subsidiary SGD 4.50% 2017 42,750 42,626Loan from a subsidiary SGD 4.00% 2018 90,000 89,753Loan from a subsidiary SGD 4.25% 2019 100,000 99,438

441,050 438,155

2015Term Commodity


Murabaha Facility D (2016) SGD *SOR+Margin 2016 30,000 30,000Term Commodity


Murabaha Facility C SGD *SOR+Margin 2019 30,000 29,313Revolving Murabahah Facility SGD *SOR+Margin 2018 28,000 27,600Loan from a subsidiary SGD 4.50% 2017 42,750 42,466Loan from a subsidiary SGD 4.00% 2018 90,000 89,558Loan from a subsidiary SGD 4.25% 2019 100,000 99,205

485,750 481,617

* Swap Offer Rate


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(a) Commodity Murabaha Facilities

The outstanding $208.3 million (2015: $225.0 million) Commodity Murabaha Facilities from various institutional banks are secured by, inter alia:

• A first ranking legal mortgage over 8 (2015: 10) investment properties with a combined carrying value of $574,400,000 (2015: $653,500,000) (collectively, the “Securitised Properties”) (or, where title to the Securitised Properties has not been issued, an assignment of building agreement or agreement for lease (as the case may be) coupled with a mortgage in escrow);

• Assignment of insurances, assignment of proceeds and assignment of Property Management Agreements relating to the Securitised Properties; and

• A fixed and floating charge over the other assets of the Trust relating to the Securitised Properties.

As at 31 December 2016, the Revolving Commodity Murabaha Facility D has an undrawn amount of $4.7 million (2015: $18.0 million).

(b) Revolving Murabahah Facility

The Revolving Murabahah Facility, which is fully undrawn (2015: with an outstanding amount of $28.0 million), from an institutional bank is secured by, inter-alia:

• A first ranking legal mortgage over 8 Commonwealth Lane and 34 Penjuru Lane with a combined carrying value of $97,700,000 (2015: $113,900,000) (“Dual Secured Properties”);

• Assignment of insurances, assignment of proceeds and assignment of Property Management Agreements relating to the Dual Secured Properties; and

• A fixed and floating charge over the other assets of the Trust relating to the Dual Secured Properties.

As at 31 December 2016, the Revolving Murabahah Facility has an undrawn amount of $50.0 million (2015: $22.0 million).


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(c) Unsecured Multicurrency Trust Certificates (“Trust Certificates”)

On 16 April 2013, the Trust, through its wholly-owned subsidiary, Sabana Sukuk Pte. Ltd. (the “Programme Issuer”), established a $500.0 million Multicurrency Islamic Trust Certificates Issuance Programme (the “Trust Certificates Programme”). Under the Trust Certificates Programme, the Programme Issuer may, subject to compliance with all relevant laws, regulations and directives, from time to time issue Trust Certificates denominated in Singapore dollars and/or any other currencies.

The payment of all amounts payable in respect of the Trust Certificates will be unconditionally and irrevocably guaranteed by HSBC Institutional Trust Services (Singapore) Limited in its capacity as Trustee of the Trust.

The Group issued the following Trust Certificates under its Trust Certificates Programme:

• $90.0 million 4.0 per cent. Trust Certificates issued on 19 March 2014 and due on 19 March 2018; and

• $100.0 million 4.25 per cent. Trust Certificates issued on 3 October 2014 and due on 3 April 2019.

(d) Loans from subsidiaries

The loans from subsidiaries are unsecured, bear fixed profit rates of 4.5% per annum, 4.0% per annum and 4.25% per annum and are repayable on 24 September 2017, 19 March 2018 and 3 April 2019 respectively.

11 CONVERTIBLE SUKUK – DEBT COMPONENT

Group2016 2015$’000 $’000

Carrying amount of debt component at beginning of the year 41,933 70,375Profit accretion, including amortisation of transaction costs 462 660Extinguishment of debt component arising from the redemption

of Convertible Sukuk pursuant to the put option exercised by Sukukholders – (29,102)

Carrying amount of debt component at end of the year 42,395 41,933


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11 CONVERTIBLE SUKUK – DEBT COMPONENT (CONTINUED)

On 24 September 2012, a wholly-owned subsidiary of the Trust, Sabana Treasury Pte. Ltd. (the “Issuer”), issued a $80.0 million in aggregate principal amount of unsecured Convertible Sukuk due on 24 September 2017 of 4.50% per annum. The Convertible Sukuk are convertible by Sukukholders into Units of the Trust at any time on or after 9 November 2012 up to the close of business on the seventh day prior to 24 September 2017. As at 31 December 2016, the conversion price per Unit (“Conversion Price”) is $1.0131 (2015: $1.0680). The Trust has the option to pay cash in lieu of issuing new Units on conversion of any Convertible Sukuk.

Since the date of their issue, an aggregate principal amount of $7.5 million (2015: $7.5 million) of Convertible Sukuk has been converted into 6,285,090 (2015: 6,285,090) Units by converting Sukukholders.

The Convertible Sukuk may be redeemed, after 24 September 2015, at the option of the Issuer, in whole but not in part, at 100% of the principal amount of the Convertible Sukuk outstanding, plus any accrued but unpaid profit, if the closing price of the Units for any 20 consecutive trading days is at least 130% of the Conversion Price in effect on such trading day.

The Convertible Sukuk may also be redeemed at any time prior to 24 September 2017, at the option of the Issuer, in whole but not in part, at 100% of the principal amount of the Convertible Sukuk outstanding, plus any accrued but unpaid profit, if at any time at least 90% of the principal amount of the Convertible Sukuk originally issued have already been converted, redeemed or purchased and cancelled.

On 24 September 2015, an aggregate principal amount of $29.7 million of Convertible Sukuk was redeemed and cancelled pursuant to the put option exercised by Sukukholders.

Unless previously redeemed pursuant to the put option exercised by Sukukholders on 24 September 2015 or by the Issuer at any time on or after 24 September 2015, the final maturity date is 24 September 2017.

As at 31 December 2016, the effective profit rate for the Convertible Sukuk – debt component is approximately 5.65% (2015: 5.65%) per annum.


142


12 DERIVATIVE FINANCIAL INSTRUMENTS

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Current assetsProfit rate swaps at fair value through

Statement of Total Return – 403 – 403

Non-current assetsProfit rate swaps at fair value through

Statement of Total Return 522 – 522 –

Current liabilitiesProfit rate swaps at fair value through

Statement of Total Return (562) – (562) –Embedded derivatives relating to Convertible

Sukuk at fair value through Statement of Total Return * (2) * –

(562) (2) (562) –

Non-current liabilitiesProfit rate swaps at fair value through

Statement of Total Return – (206) – (206)

Total derivative financial instruments (40) 195 (40) 197

Derivative financial instruments as a percentage of net assets 0.00% 0.03% 0.00% 0.03%

* Less than $1,000

The Group uses profit rate swaps to manage its exposure to profit rate movements on its floating rate bearing Term Commodity Murabaha Facilities by swapping the profit rates on a proportion of these term loans from floating rates to fixed rates.

Profit rate swaps with a total notional amount of $165.0 million (2015: $165.0 million) had been entered into at the reporting date to provide fixed rate funding for terms of 3.0 to 5.0 years (2015: 1.5 to 5 years) at a weighted average profit rate of 3.98% (2015: 3.57%) per annum.


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12 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

Offsetting financial assets and financial liabilities

The Group’s derivative transactions are entered into under International Derivatives Swaps and Dealers Association (“ISDA”) Master Netting Agreements. The ISDA does not meet the criteria for offsetting in the Statement of Financial Position. This is because it creates a right of set-off of recognised amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Group or the counterparties. In addition, the Group and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously.

As at 31 December 2016 and 31 December 2015, the Group’s derivative assets and liabilities do not have any balances that are eligible for offsetting under the enforceable master netting arrangement.

13 UNITS IN ISSUE AND TO BE ISSUED

Group and Trust

2016 2015’000 ’000

Units in issue:At beginning of the year 732,381 724,624Units issued:- Manager’s fees paid in Units 7,410 5,946- DRP – 1,811

739,791 732,381Units to be issued:- Manager’s fees payable in Units 2,580 1,646Total Units issued and to be issued at end of the year,

excluding Units to be issued in January 2017, pursuant to the Rights Issue 742,371 734,027

- Rights Issue (Note 29) 310,712 –Total Units issued and to be issued entitled to distributions at

end of the year 1,053,083 734,027


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13 UNITS IN ISSUE AND TO BE ISSUED (CONTINUED)

Each Unit in the Trust represents an undivided interest in the Trust. The rights and interests of Unitholders are contained in the Trust Deed and include the right to:

• receive income and other distributions attributable to the Units held;

• participate in the termination of the Trust by receiving a share of all net cash proceeds derived from the realisation of the assets of the Trust and available for purposes of such distribution less any liabilities, in accordance with their proportionate interests in the Trust. However, a Unitholder has no equitable or proprietary interest in the underlying assets of the Trust and is not entitled to the transfer to it of any assets (or part thereof) or of any estate or interest in any asset (or part thereof) of the Trust; and

• attend all Unitholders’ meetings. The Trustee or the Manager may (and the Manager shall at the request in writing of not less than 50 Unitholders or one-tenth in number of the Unitholders, whichever is the lesser) at any time convene a meeting of Unitholders in accordance with the provisions of the Trust Deed.

The Unitholders cannot give any directions to the Manager or the Trustee (whether at a meeting of Unitholders or otherwise) if it would require the Trustee or the Manager to do or omit doing anything which may result in:

• the Trust ceasing to comply with the Listing Manual issued by SGX-ST or the Property Funds Appendix; or

• the exercise of any discretion expressly conferred on the Trustee or the Manager by the Trust Deed or the determination of any matter for which the agreement of either or both the Trustee and the Manager is required under the Trust Deed.

A Unitholder’s liability is limited to the amount paid or payable for any Units. The provisions of the Trust Deed provide that no Unitholders will be personally liable to indemnify the Trustee or any creditor of the Trustee in the event that liabilities of the Trust exceed its assets.

On 1 April 2014, the Trust introduced and implemented the DRP whereby the Unitholders have the option to receive their distribution in Units instead of cash or a combination of Units and cash.

During the year ended 31 December 2015, 1,811,131 new Units at the issue price range of $0.8713 to $0.9086 per Unit were issued pursuant to the DRP.

During the year ended 31 December 2016, the DRP was not implemented.


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14 NET ASSET VALUE PER UNIT

Group Trust2016 2015 2016 2015

Net asset value per Unit ($) 0.75 0.89 0.75 0.89

Net asset value per Unit is based on: $’000 $’000 $’000 $’000

Net assets 556,795 653,741 556,553 653,203

’000 ’000 ’000 ’000

Total Units issued and to be issued at end of the year (excluding Units to be issued pursuant to the Rights Issue in January 2017) (Note 13) 742,371 734,027 742,371 734,027

15 FINANCIAL RISK MANAGEMENT

15.1 Capital management

The Group reviews its capital management policy regularly so as to optimise the Group’s funding structure. The Group also monitors its exposures to various risk elements and externally imposed requirements by closely adhering to clearly established management policies and procedures. The primary objective of the Group’s capital management is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximise Unitholder’s value. In order to maintain or achieve an optimal capital structure, the Group will endeavour to employ an appropriate mix of debt and equity in financing acquisitions and assets enhancements, and utilise profit rate and currency hedging strategies where appropriate. The Manager reviews this policy on a continuous basis.

The Group is subject to the aggregate leverage limit as defined in the Property Funds Appendix. The CIS Code stipulates that the total borrowings and deferred payments (together the “Aggregate Leverage”) of a property fund should not exceed 45.0% of its Deposited Property. The Group has complied with the Aggregate Leverage limit during the financial year. There were no changes in the Group’s approach to capital management during the financial year.

As at the reporting date, the gross amounts of borrowings and retention sums as a percentage of the Group’s Deposited Property is 43.2% (2015: 41.7%).


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15 FINANCIAL RISK MANAGEMENT (CONTINUED)

15.2 Risk management framework

The Group is exposed it to market risk (including profit rate risk), credit risk and liquidity risk.

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk.

Risk management is integral to the whole business of the Group. The Manager has implemented a system of controls in place to create an acceptable balance between the benefits derived from managing risks and the cost of managing those risks. The Manager also monitors the Group’s risk management process closely to ensure an appropriate balance between control and business objectives is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s strategic direction.

The Audit Committee of the Manager assists the Board in overseeing how the Manager monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the Group’s exposure to those risks. The Audit Committee is assisted in its oversight role by an internal audit function which is outsourced to an independent professional firm (“Internal Audit”). Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

15.3 Credit risk

Credit risk is the risk of financial loss to the Group resulting from the failure of a tenant or counterparty of the Group, to settle its financial and contractual obligations, as and when they fall due.

The carrying amount of financial assets in the Statement of Financial Position represents the Group and the Trust’s maximum exposure to credit risk. The maximum exposure to credit risk at the reporting date was:

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Trade and other receivables 9,422 9,548 9,422 9,548Cash and cash equivalents 9,206 10,438 9,201 10,432

18,628 19,986 18,623 19,980


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15.3 Credit risk (continued)

The Manager has an established process to evaluate the creditworthiness of its tenants and prospective tenants to minimise potential credit risk. Credit evaluations are performed by the Property Manager and the Manager before lease agreements are entered into with prospective tenants. Security in the form of bankers’ guarantees, insurance bonds or cash security deposits are obtained prior to the commencement of the lease.

The Manager establishes an allowance account for impairment that represents its estimate of incurred losses in respect of loans and receivables. The main component of this allowance is estimated losses that relate to specific tenants or counterparties. The allowance account is used to provide for impairment losses. Subsequently when the Manager is satisfied that no recovery of such losses is possible, the financial asset is considered irrecoverable and the amount charged to the allowance account is then written off against the carrying amount of the impaired financial asset.

The ageing of gross trade receivables at the reporting date was:

Group and Trust2016 2015$’000 $’000

Not past due 48 49Past due 0 - 30 days 1,368 532Past due 31 - 60 days 448 467More than 60 days past due 3,473 479

5,337 1,527

Two tenants (2015: Two tenants) accounted for approximately $4,324,000 (2015: $1,046,000) of the gross trade receivables carrying amounts at 31 December 2016.

Impairment losses

The movements in impairment loss in respect of trade receivables are as follows:

Group and Trust2016 2015$’000 $’000

At 1 January 20 –Impairment losses recognised during the year 2,353 20At 31 December 2,373 20


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15.3 Credit risk (continued)

Impairment losses (continued)

Trade receivables are individually assessed for impairment at the end of the financial year. The impairment loss on trade receivables as at 31 December 2016 relates to one tenant (2015: one tenant) in financial difficulties and has defaulted in payments.

Impairment loss of approximately $2,353,000 (2015: $20,000) were made for the outstanding balances that were past due and in excess of security deposits held by Sabana REIT.

The movements in impairment loss in respect of other receivables are as follows:

Group and Trust2016 2015$’000 $’000

At 1 January 63 –Impairment losses recognised during the year – 63At 31 December 63 63

The Manager believes that no additional impairment loss is necessary in respect of the remaining trade and other receivables as these amounts mainly arise from tenants who have good payment records and the retention of sufficient security in the form of bankers’ guarantees or cash security deposits from tenants.

Cash and fixed deposits are placed with financial institutions which are regulated. The Group limits its credit risk exposure by dealing with counterparties that have sound credit ratings. Given these high credit ratings, management does not expect any counterparty to fail to meet its obligations.

15.4 Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Manager monitors and maintains a level of cash and cash equivalents deemed adequate to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. In addition, the Manager monitors and observes the CIS Code issued by the MAS concerning limits on total borrowings.


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15.4 Liquidity risk (continued)

The following are the contractual undiscounted cash flows of financial liabilities, including estimated profit payments and excluding the impact of netting agreements:

<---------------- Cash flows ---------------->Carrying amount

Contractual cash flows

Less than 1 year

Between 1 to 5 years

More than 5 years

$’000 $’000 $’000 $’000 $’000Group

2016Non-derivative financial liabilitiesCommodity Murabaha Facilities 206,338 (222,020) (80,544) (141,476) –Convertible Sukuk – debt

component 42,395 (44,157) (44,157) – –Trust Certificates 189,191 (203,952) (7,850) (196,102) –Trade and other payables* 27,393 (27,393) (13,882) (10,887) (2,624)

465,317 (497,522) (146,433) (348,465) (2,624)

Derivative financial liabilities Profit rate swaps (net-settled) 562 (577) (577) – –

2015Non-derivative financial liabilitiesCommodity Murabaha Facilities 222,788 (238,244) (127,990) (110,254) –Revolving Murabahah Facility 27,600 (30,624) (980) (29,644) –Convertible Sukuk – debt

component 41,933 (46,087) (1,924) (44,163) –Trust Certificates 188,763 (211,824) (7,850) (203,974) –Trade and other payables* 29,709 (29,709) (13,781) (13,149) (2,779)

510,793 (556,488) (152,525) (401,184) (2,779)

Derivative financial liabilities Profit rate swaps (net-settled) 206 (763) (462) (301) –

* Trade and other payables exclude rental received in advance.


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15.4 Liquidity risk (continued)

<---------------- Cash flows ---------------->Carrying amount

Contractual cash flows

Less than 1 year

Between 1 to 5 years

More than 5 years

$’000 $’000 $’000 $’000 $’000Trust

2016Non-derivative financial liabilitiesCommodity Murabaha Facilities 206,338 (222,020) (80,544) (141,476) –Loans from subsidiaries 231,817 (248,109) (52,007) (196,102) –Trade and other payables* 27,391 (27,391) (13,880) (10,887) (2,624)

465,546 (497,520) (146,431) (348,465) (2,624)

Derivative financial liabilities Profit rate swaps (net-settled) 562 (577) (577) – –

2015Non-derivative financial liabilitiesCommodity Murabaha Facilities 222,788 (238,244) (127,990) (110,254) –Revolving Murabahah Facility 27,600 (30,624) (980) (29,644) –Loans from subsidiaries 231,229 (257,911) (9,774) (248,137) –Trade and other payables* 29,702 (29,702) (13,774) (13,149) (2,779)

511,319 (556,481) (152,518) (401,184) (2,779)

Derivative financial liabilities Profit rate swaps (net-settled) 206 (763) (462) (301) –

* Trade and other payables exclude rental received in advance.

The maturity analyses show the contractual undiscounted cash flows of the Group and the Trust’s financial liabilities on the basis of their earliest possible contractual maturity. For derivative financial instruments, the cash inflows/(outflows) represent the contractual undiscounted cash flows relating to these instruments. The amounts are compiled on a net basis for derivatives that are net-settled.

It is not expected that the cash flows included in the maturity analysis of the Group and the Trust could occur significantly earlier, or at significantly different amounts.


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15.5 Market risk

Market risk is the risk that changes in market prices, such as profit rates, foreign exchange rates and equity prices will affect the Group’s total return or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. The Group does not have any exposure to foreign exchange rates and equity prices risks.

15.6 Profit rate risk

The Group’s exposure to fluctuations in profit rates relates primarily to borrowings. Profit rate risk is managed by the Group on an on-going basis with the primary objective of limiting the extent to which net profit expense could be affected by adverse movements in profit rates. The Group adopts a policy of ensuring that majority of its exposures to changes in profit rates on borrowings is on a fixed-rate basis. This is achieved by entering into profit rate swaps and fixed rate borrowings.

As at the reporting date, the Group had entered into profit rate swaps with total contracted notional amounts of $165.0 million (2015: $165.0 million) whereby the Group had agreed with counterparties to exchange, at specified intervals, the difference between the floating rate pegged to the Singapore dollar SOR and fixed rate profit amounts calculated by reference to the contracted notional amounts of the borrowings.

Profit rate profile

As at the reporting date, the profit rate profile of profit-bearing financial instruments was:

Group TrustNominal amount Nominal amount2016 2015 2016 2015$’000 $’000 $’000 $’000

Fixed rate instrumentsFinancial assets 6,480 7,670 6,480 7,670Financial liabilities (232,750) (232,750) (232,750) (232,750)Effects of profit rate swaps (165,000) (165,000) (165,000) (165,000)

(391,270) (390,080) (391,270) (390,080)

Variable rate instrumentsFinancial liabilities (208,300) (253,000) (208,300) (253,000)Effects of profit rate swaps 165,000 165,000 165,000 165,000

(43,300) (88,000) (43,300) (88,000)


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15.6 Profit rate risk (continued)

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through Statement of Total Return and the Group does not designate profit rate swaps as hedging instruments under a fair value hedge accounting model. Therefore a change in profit rates at the reporting date would not affect the Statement of Total Return.

Cash flow sensitivity analysis for variable rate instruments

A change of 50 basis points (“bp”) in profit rate at the reporting date would (decrease)/increase total return after taxation by the amounts shown below. The analysis assumes that all variables remain constant. The analysis is performed on the same basis for 2015.

Total return after taxation

50 bpincrease

50 bpdecrease

$’000 $’000

Group and Trust

2016Financial liabilities (217) 217

2015Financial liabilities (440) 440

16 GROSS REVENUE

Group and Trust2016 2015$’000 $’000

Property rental income 79,686 88,975Other operating income 12,121 11,849

91,807 100,824


153


17 PROPERTY EXPENSES

Group and Trust2016 2015$’000 $’000

Land rent 4,455 2,532Service, repair and maintenance expenses 7,041 6,497Property and lease management fees 2,754 3,025Property tax 6,407 5,400Utilities 10,829 10,880Impairment loss on trade and other receivables 2,353 83Others 1,026 802

34,865 29,219

Property expenses represent the direct operating expenses arising from rental and investment properties.

18 FINANCE INCOME AND COSTS

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Finance income:Profit income from fixed deposits with

Islamic financial institutions 30 65 30 65Ta’widh (compensation on late

payment of rent) 263 65 263 65293 130 293 130

Finance costs:Commodity Murabaha Facilities 7,091 7,483 7,091 7,483Revolving Murabahah Facility 599 324 599 324Profit rate swaps* 637 513 637 513Convertible Sukuk 1,929 2,914 – –Trust Certificates 7,872 7,850 – –Loans from subsidiaries – – 9,801 10,764Amortisation of transaction costs 2,784 2,284 2,482 1,857Brokerage and agent fees 177 180 163 165

21,089 21,548 20,773 21,106

Net finance costs 20,796 21,418 20,480 20,976

* Except for the finance costs arising from profit rate swaps, all other finance income and cost items represent the profit income and expenses in respect of financial assets and liabilities not carried at fair value through Statement of Total Return.


154


19 MANAGER’S FEES

Included in Manager’s fees of the Group and Trust is an aggregate of 8,344,623 (2015: 6,232,961) Units, of which 5,764,396 (2015: 4,587,334) Units were issued and another 2,580,227 (2015: 1,645,627) Units will be issued to the Manager by the Trust, amounting to approximately $4,266,000 (2015: $5,011,000) at various Unit prices in satisfaction of Manager’s fees payable in respect of the year ended 31 December 2016.

20 DONATION OF NON-SHARI’AH COMPLIANT INCOME

The total amount of net income subjected to the cleansing process for the quarter ended 31 December 2016 was approved by the Independent Shari’ah Committee to be donated to Singapore Kadayanallur Muslim League.

During the year, donations that had been approved by the Independent Shari’ah Committee included Lien Aid, The Operation Hope Foundation Ltd for their Nepal Earthquake Rebuilding Project and Bursaries Sponsorship and Mendaki Sense (2015: Singapore Red Cross for the Cyclone Pam 2015 Relief Fund, Mendaki Sense, Majlis Ugama Islam Singapura and Singapore Red Cross for the South India Floods 2015 Relief Fund).

21 OTHER TRUST EXPENSES

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Auditors’ remuneration - audit fees 189 189 181 181- non-audit fees 90 53 84 47Valuation fees 118 116 118 116Professional fees 369 418 355 403Service fees payable to subsidiaries – – 59 59Other expenses 289 433 276 420

1,055 1,209 1,073 1,226


155


22 TAX EXPENSE

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Tax expenseCurrent year * * – –

Reconciliation of effective tax rate

Total return for the year before taxation and distribution (62,464) (73,436) (62,168) (73,189)

Tax using Singapore tax rate of 17% (2015: 17%) (10,619) (12,484) (10,569) (12,442)

Non-tax deductible items 16,962 21,454 16,912 21,310Tax exempt income (62) (447) (62) (345)Tax transparency (6,281) (8,523) (6,281) (8,523)

* * – –

* Less than $1,000

23 EARNINGS PER UNIT

Basic and diluted earnings per Unit

The calculation of basic earnings per Unit is based on the weighted average number of Units during the year and total return for the year.

Group Trust2016 2015 2016 2015$’000 $’000 $’000 $’000

Total return for the year after taxation and before distribution (62,464) (73,436) (62,168) (73,189)


156


23 EARNINGS PER UNIT (CONTINUED)

Basic and diluted earnings per Unit (continued)

Number of UnitsGroup Trust

2016 2015 2016 2015’000 ’000 ’000 ’000

Weighted average number of Units- Beginning of the year 732,381 724,624 732,381 724,624- Issued as payment of Manager’s fees 3,938 3,178 3,938 3,178- Issued pursuant to DRP – 1,405 – 1,405- To be issued as payment of Manager’s fees payable in Units 7 5 7 5Weighted average number of Units 736,326 729,212 736,326 729,212

The diluted earnings per Unit is the same as the basic earnings per Unit for the Group and the Trust (2015: Group and the Trust) as the Convertible Sukuk was anti-dilutive at the Group and the Trust (2015: Group and the Trust) levels.

24 FAIR VALUES AND ACCOUNTING CLASSIFICATIONS OF FINANCIAL INSTRUMENTS

Measurement of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. When applicable, further information about the assumptions made in determining fair values of non-financial assets and liabilities are disclosed in the relevant notes specific to those non-financial assets or liabilities.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

• Level 3: inputs for the asset or liability that are not based an observable market data (unobservable inputs).

If the inputs used to measure the fair values of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement (with Level 3 being the lowest).


157


24 FAIR VALUES AND ACCOUNTING CLASSIFICATIONS OF FINANCIAL INSTRUMENTS (CONTINUED)

Measurement of fair values (continued)

The Group recognises transfer between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

Accounting classifications and fair values

The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follows. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Carrying amount Fair value

Group

Note Designated at fair value

Loans and

receivables

Other financial liabilities Total Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2016Financial assets

measured at fair valueDerivative assets 12 522 – – 522 – 522 – 522

Financial assets not measured at fair value

Trade and other receivables# 7 – 9,422 – 9,422Cash and cash equivalents 8 – 9,206 – 9,206

– 18,628 – 18,628

Financial liabilities measured at fair value

Derivative liabilities 12 (562) – – (562) – (562) * (562)

Financial liabilities not measured at fair value

Trade and other payables** 9 – – (10,614) (10,614)Security deposits 9 – – (16,779) (16,779) – – (15,660) (15,660)Borrowings 10 – – (437,924) (437,924) – (224,273)(206,338) (430,611)

– – (465,317) (465,317)

# Excludes prepayment* Less than $1,000** Excludes security deposits and rental received in advance


158



Accounting classifications and fair values (continued)


Group


Loans and

receivables


$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000





– 19,986 – 19,986


Derivative liabilities 12 (208) – – (208) – (206) (2) (208)



– – (510,793) (510,793)

# Excludes prepayment** Excludes security deposits and rental received in advance


159





Trust


Loans and

receivables


$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000





– 18,623 – 18,623


Derivative liabilities 12 (562) – – (562) – (562) – (562)



– – (465,546) (465,546)



160





Trust


Loans and

receivables


$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000





– 19,980 – 19,980


Derivative liabilities 12 (206) – – (206) – (206) – (206)



– – (511,319) (511,319)



161



Level 3 fair values

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurement in Level 3 of the fair value hierarchy:

Embedded derivatives relating to Convertible Sukuk

Group 2016 2015$’000 $’000

As at 1 January (2) (601) Changes in fair value recognised in Statement of Total Return 2 599As at 31 December * (2)

* Less than $1,000

Valuation technique and significant unobservable inputs

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.

Financial instruments measured at fair value

Group and Trust

Type Valuation technique

Significant unobservable input

Inter-relationship between key unobservable inputs and fair value measurement

Embedded derivatives related to the Convertible Sukuk

The fair value of the embedded derivatives relating to Convertible Sukuk is derived from an option pricing model.

Standard deviation

The estimated fair value of the embedded derivatives relating to Convertible Sukuk would increase if the standard deviation was higher.

Profit rate swaps

The fair value of profit rate swaps is based on broker quotes at the reporting date. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market profit rates for a similar instrument at the measurement date.

Not applicable Not applicable


162



Financial instruments not measured at fair value

Borrowings

The carrying amounts of profit-bearing borrowings which are repriced within 3 months from the reporting date approximate their fair values.

The fair values of the Trust Certificates were obtained from market quotes.

The fair value of the debt component of the Convertible Sukuk and the loans from subsidiaries are determined by discounting the estimated future principal and profit cash flows using market profit rates for similar borrowings at the reporting date.

25 OPERATING SEGMENTS

The operating segment information is based on the Group’s internal reporting structure for the purpose of allocating resources and assessing performance by the Manager’s CEO (the chief operating decision maker).

Segment gross revenue comprises mainly of income generated from tenants. Segment net property income represents the income earned by each segment after allocating property expenses.

Segment assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly cash and cash equivalents, other receivables, borrowings and other payables.


163


25 OPERATING SEGMENTS (CONTINUED)

The Group has four reportable segments whose information are presented in the tables below:

<--------------------------------- Group --------------------------------->

High-tech industrial

Chemical warehouse & logistics

Warehouse & logistics

General industrial Total

$’000 $’000 $’000 $’000 $’000

2016Gross revenue 53,598 6,919 21,553 9,737 91,807Property expenses (25,816) (278) (6,050) (2,721) (34,865)Segment net property income 27,782 6,641 15,503 7,016 56,942Net change in fair value of investment

properties (54,252) (9,200) (16,280) (11,130) (90,862)Loss on divestment of investment

properties (432) – (126) – (558)(34,478)

Unallocated amounts:- Finance income 293- Finance costs (21,089)- Other expenses (6,955)- Net change in fair value of financial

derivatives (235)Total return for the year before

taxation (62,464)

Assets and liabilitiesSegment assets 572,988 85,130 249,684 104,400 1,012,202Unallocated assets 10,687Total assets 1,022,289

Segment liabilities 14,086 38 5,705 2,085 21,914Unallocated liabilities:- borrowings 437,924- others 6,256Total liabilities 466,094

Other segment informationCapital expenditure 1,520 – 80 230 1,830


164


25 OPERATING SEGMENTS (CONTINUED)

<--------------------------------- Group --------------------------------->

High-tech industrial

Chemical warehouse & logistics

Warehouse & logistics

General industrial Total

$’000 $’000 $’000 $’000 $’000

2015Gross revenue 59,083 8,924 23,323 9,494 100,824Property expenses (24,004) (324) (2,947) (1,944) (29,219)Segment net property income 35,079 8,600 20,376 7,550 71,605Net change in fair value of investment

properties (62,792) (23,500) (25,576) (4,840) (116,708)(45,103)

Unallocated amounts:- Finance income 130- Finance costs (21,548)- Other expenses (8,526)- Loss on exercise of put option

on Convertible Sukuk by Sukukholders (648)

- Net change in fair value of financial derivatives 2,259

Total return for the year before taxation (73,436)

Assets and liabilitiesSegment assets 663,402 93,706 282,460 114,778 1,154,346Unallocated assets 11,053Total assets 1,165,399

Segment liabilities 14,708 41 6,254 3,646 24,649Unallocated liabilities:- borrowings 481,084- others 5,925Total liabilities 511,658

Other segment informationCapital expenditure 538 – 777 140 1,455

Geographical segments

Segment information in respect of the Group’s geographical segments is not presented as the Group’s activities for the year ended 31 December 2016 and 31 December 2015 related wholly to properties located in Singapore.

Major customer A major customer contributed $10,441,000 (2015: $15,802,000) to the Group’s total revenue from High-tech industrial, Chemical warehouse & logistics and Warehouse & logistics segments for the year ended 31 December 2016.


165


26 COMMITMENTS

(a) Operating lease commitments

The Group and the Trust are required to pay JTC Corporation (“JTC”) and Housing Development Board (“HDB”) annual land rent in respect of certain properties. The annual land rent payable is based on the market land rent in the relevant year of the lease term. However, the lease agreements limit any increase in the annual land rent from year to year to 5.5% of the annual land rent for the immediate preceding year.

The land rent paid/payable to JTC and HDB amounted to approximately $6,426,000 in relation to 18 properties (2015: $6,750,000 in relation to 18 properties) for the year ended 31 December 2016 (including amounts which have been recharged to the master lessees).

(b) Lease commitments

The Group and the Trust lease out their investment properties under operating lease agreements. Non-cancellable operating lease rentals receivable are as follows:

Group and Trust2016 2015$’000 $’000

Less than one year 73,586 74,638Between one to five years 108,723 124,832More than five years 11,464 40,323

193,773 239,793

(c) Proposed acquisition of investment properties

The Group and the Trust have entered into conditional put and call option agreements for the proposed acquisitions of the properties located at 72 Eunos Avenue 7, 107 Eunos Avenue 3 and 47 Changi South Avenue 2 for purchase considerations of S$20.0 million, S$34.5 million and S$23.0 million respectively in December 2016.

The proposed acquisition of 47 Changi South Avenue 2 from a subsidiary of Vibrant Group Limited, a substantial Unitholder, is subject to, amongst others, the approval of Unitholders.

(d) Capital expenditure

The Group and the Trust are committed to incur other capital expenditure of approximately $12.5 million (2015: $12.5 million). These commitments are expected to be settled by 2018.


166


27 SIGNIFICANT RELATED PARTY TRANSACTIONS

In the normal course of its business, the Group carried out transactions with related parties on terms agreed between the parties. During the financial year, in addition to those disclosed elsewhere in the financial statements, there were the following significant related party transactions:

Group and Trust2016 2015$’000 $’000

Rental income received/receivable from a sponsor and its related corporations 10,441 15,802

Divestment fees paid/payable to the Manager 83 –Manager’s fees and reimbursables paid/payable to the Manager 5,333 6,263Property/lease management fees and reimbursables paid/payable to the

Property Manager 2,754 3,025Trustee fees paid/payable to the Trustee 454 544

28 FINANCIAL RATIOS

Group 2016 2015

% %

Ratio of expenses to weighted average net assets(1)

- including performance component of Manager’s fees 1.13 1.12- excluding performance component of Manager’s fees 1.13 1.12

Portfolio turnover rate(2) – –

(1) The annualised ratios are computed in accordance with the guidelines of Investment Management Association of Singapore. The expenses used in the computation relate to expenses of the Group, excluding property expenses, finance costs and tax expense.

(2) The annualised ratio is computed based on the lesser of purchases or sales of underlying investment properties of the Group expressed as a percentage of daily average net asset value.

29 SUBSEQUENT EVENTS

(i) Subsequent to 31 December 2016, the Manager declared a distribution of 0.88 cents per Unit in respect of the period from 1 October 2016 to 31 December 2016.

(ii) On 25 January 2017, Sabana REIT issued 310,712,244 Rights Units at an issue price of $0.258 per Unit to raise gross proceeds of approximately S$80.2 million.


167


Additional Information

INTERESTED PARTY TRANSACTIONS

Interested person (as defined in the Listing Manual of the SGX-ST) and interested party (as defined in the Property Funds Appendix) transactions (collectively “Interested Party Transactions”) during the financial year are as follows.

Name of Interested Party

Aggregate value of all Interested Party

Transactions during the financial year under review

(excluding transactions less than $100,000 and transactions conducted

under Unitholders’ mandate pursuant to

Rule 920(1) of the Listing Manual)

S$’000

Aggregate value of all Interested Party

Transactions conducted under Unitholders’

mandate pursuant to Rule 920 of the Listing Manual

(excluding transactions less than $100,000)

S$’000Vibrant Group Limited and its subsidiaries- Rental income - Manager’s fees- Property and lease management fees- Divestment fee- Renewal of master leases(2)

- Acquisition of property(3)

10,4415,3332,754

8310,11223,000

–

HSBC Institutional Trust Services (Singapore) Limited and its associates- Trustee’s fees- Finance costs (profit payments)- Finance costs (agency commodity fees)

454

1,34652

–

TOTAL OPERATING EXPENSES(4)

Description S$’000

Total operating expenses (5) (inclusive of interested party expenses paid to the Manager and interested parties)

41,707

Total operating expenses as a percentage of net asset value (as at 31 December 2016) 7.5%

Notes:(1) Sabana REIT has not obtained a mandate from its Unitholders for interested person transactions.(2) Refers to the total aggregate rent payable by Vibrant Group Limited and its subsidiaries for duration of the renewed master leases entered into between the

Trustee and Vibrant Group Limited and its subsidiaries.(3) Refers to the purchase consideration payable for the proposed acquisition of the property at 47 Changi South Avenue 2, which is subject to Unitholders’

approval.(4) For the purpose of complying with paragraph 11.1(i) of the Property Funds Appendix.(5) Total operating expenses include property expenses and other trust expenses but do not include finance costs.

168


Statistics of Unitholdings

ISSUED AND FULLY PAID UP UNITS (As at 15 March 2017)

Date EventNumber of

UnitsAmount (S$’000) Price (S$)

29 January 2016 Quarterly management fee 1,645,627 1,175 0.7140 26 April 2016 Quarterly management fee 1,767,466 1,118 0.6325 29 July 2016 Quarterly management fee 1,946,359 1,054 0.5415 25 October 2016 Quarterly management fee 2,050,571 1,066 0.5199 27 January 2017 Quarterly management fee 2,580,227 1,028 0.3986

There were 1,053,083,530 Units (voting rights: one vote per Unit) outstanding as at 15 March 2017. There is only one class of Units in Sabana REIT.

Market capitalisation S$484.4 million (based on market closing price of S$0.46 on 15 March 2017).

DISTRIBUTION OF UNITHOLDINGS (As at 15 March 2017)

Size of UnitholdingsNo. of

UnitholdersPercentage of

Unitholders (%)No. of Units

Percentage of Units inIssue (%)

1 - 99 107 0.87 5,571 0.00100 - 1,000 1,064 8.66 973,559 0.091,001 - 10,000 5,251 42.72 28,439,205 2.7010,001 - 1,000,000 5,825 47.40 305,643,421 29.031,000,001 and above 43 0.35 718,021,774 68.18TOTAL 12,290 100.00 1,053,083,530 100.00

TWENTY LARGEST UNITHOLDERS (As at 15 March 2017)

No. Name No. of Units %

1 Citibank Nominees Singapore Pte Ltd 154,378,708 14.662 DBS Nominees (Private) Limited 93,775,997 8.903 United Overseas Bank Nominees (Private) Limited 88,611,910 8.414 HSBC (Singapore) Nominees Pte Ltd 84,563,289 8.035 RHB Securities Singapore Pte Ltd 58,632,519 5.576 Raffles Nominees (PTE) Limited 46,879,058 4.457 Sabana Real Estate Investment Management Pte Ltd 21,242,726 2.028 Maybank Nominees (Singapore) Private Limited 20,000,000 1.909 DBS Vickers Securities (Singapore) Pte Ltd 16,976,666 1.6110 ABN AMRO Nominees Singapore Pte Ltd 16,853,264 1.6011 DBSN Services Pte. Ltd. 15,148,345 1.4412 UOB Kay Hian Private Limited 11,523,422 1.0913 OCBC Nominees Singapore Private Limited 9,456,544 0.9014 Meren Pte Ltd 8,600,000 0.8215 Maybank Kim Eng Securities Pte. Ltd. 8,565,350 0.8116 Phillip Securities Pte Ltd 6,315,972 0.6017 CIMB Securities (Singapore) Pte. Ltd. 5,968,321 0.5718 DB Nominees (Singapore) Pte Ltd 5,758,274 0.5519 OCBC Securities Private Ltd 4,712,386 0.4520 Lee Ai Leng 3,834,000 0.36

TOTAL 681,796,751 64.74

169


Statistics of Unitholdings (continued)

UNITHOLDINGS OF THE DIRECTORS OF THE MANAGER(As recorded in the Register of Directors’ Unitholdings as at 21 January 2017)

Direct interest Deemed interest Directors No. of Units %1 No. of Units %1

Steven Lim Kok Hoong – – – –Yong Kok Hoon (2) – – 1,050,000 0.14 Kevin Xayaraj (3) – – 27,227,112 3.68 Henry Chua Tiong Hock – – – –Ng Shin Ein – – – –

Notes:(1) The percentage interest is based on total issued Units of 739,791,059 as at 21 January 2017.(2) Yong Kok Hoon is deemed to have an interest in the Units held by his spouse, Ong Lee Choo. Subsequent to the issuance of Rights

Units on 25 January 2017, Mr Yong’s deemed interest became 1,491,000 Units (0.14% based on 1,050,503,303 Units in issue on 25 January 2017 and 1,053,083,530 Units in issue on 15 March 2017.)

(3) Kevin Xayaraj is deemed to have an interest in the Units held by Sabana Real Estate Investment Management Pte. Ltd. by virtue of Section 7 of the Companies Act. Subsequent to the issuance of Rights Units on 25 January 2017, Mr Xayaraj’s deemed interest became 38,662,499 Units (3.68% based on 1,050,503,303 Units in issue). As at 15 March 2017, subsequent to the issuance of 2,580,227 management fee Units for 4Q 2016, Mr Xayaraj’s deemed interest became 41,242,726 Units (3.92% based on 1,053,083,530 Units in issue.)

SUBSTANTIAL UNITHOLDERS(As recorded in the Register of Substantial Unitholdings as at 15 March 2017)

Direct interest Deemed interest Substantial Unitholders No. of Units %1 No. of Units %1

Singapore Enterprises Private Limited 55,461,644 5.27 – –Vibrant Group Limited (2) 13,135,119 1.25 96,704,370 9.18 Vibrant Capital Pte Ltd (3) – – 109,839,489 10.43 Lian Hup Holdings Pte Ltd (4) – – 109,839,489 10.43 Khua Hock Su (5) 1,745,180 0.17 109,839,489 10.43 Khua Kian Keong (6) 18,442,960 1.75 109,839,489 10.43 Wealthy Fountain Holdings Inc (7) 43,943,000 4.18 – –Shanghai Summit Pte Ltd (7) – – 43,943,000 4.18 Tong Jinquan (7) 21,075,200 2.01 43,943,000 4.18 e-Shang Infinity Cayman Limited (8) 52,705,000 5.01 – –e-Shang Jupiter Cayman Limited (9) – – 52,705,000 5.01 ESR Cayman Limited (10) – – 52,705,000 5.01 WP OCIM One LLC (10) – – 52,705,000 5.01 WP X Investment VI Ltd . (11) – – 52,705,000 5.01 Warburg Pincus Private Equity X, L.P. (12) – – 52,705,000 5.01 Warburg Pincus X, L.P. (13) – – 52,705,000 5.01 Warburg Pincus LLC (14) – – 52,705,000 5.01 Warburg Pincus X GP L.P. (15) – – 52,705,000 5.01 WPP GP LLC (16) – – 52,705,000 5.01 Warburg Pincus Partners, L.P. (17) – – 52,705,000 5.01 Warburg Pincus Partners GP LLC. (18) – – 52,705,000 5.01 Warburg Pincus & Co. (19) – – 52,705,000 5.01 Charles R. Kaye (20) – – 52,705,000 5.01 Joseph P. Landy (20) – – 52,705,000 5.01

170


Statistics of Unitholdings (continued)

Notes:(1) The percentage interest is based on total issued Units of 1,053,083,530 as at 15 March 2017.(2) Vibrant Group Limited ("Vibrant Group") is deemed to have an interest in the Units held by Singapore Enterprises Private Limited

("Singapore Enterprises") and Sabana Real Estate Investment Management Pte. Ltd. ("SREIM").(3) Vibrant Capital Pte Ltd ("Vibrant Capital") is deemed to have an interest in the Units held by Vibrant Group, Singapore Enterprises

and SREIM. (4) Lian Hup Holdings Pte Ltd ("Lian Hup") is deemed to have an interest in the Units held by Vibrant Capital, Vibrant Group, Singapore

Enterprises and SREIM. (5) Khua Hock Su is deemed to have an interest in the Units held by Lian Hup, Vibrant Capital, Vibrant Group, Singapore Enterprises

and SREIM. (6) Khua Kian Keong is deemed to have an interest in the Units held by Lian Hup, Vibrant Capital, Vibrant Group, Singapore Enterprises

and SREIM.(7) Tong Jinquan is the sole shareholder of Shanghai Summit Pte Ltd which is the sole shareholder of Wealthy Fountain Holdings Inc and

accordingly, is deemed to be interested in the Units which Wealthy Fountain Holdings Inc holds.(8) e-Shang Infinity Cayman Limited, a company established in the Cayman Islands, is a wholly-owned subsidiary of e-Shang Jupiter

Cayman Limited ("ES Jupiter"), a company established in the Cayman Islands. (9) ES Jupiter, a company established in the Cayman Islands, is a 95.2% owned subsidiary of ESR Cayman Limited ("ESR"), a company

established in the Cayman Islands.(10) WP OCIM One LLC ("WP OCIM"), a Delaware limited liability company, holds approximately 39.9% of the issued share capital of

ESR.(11) WP X Investment VI Ltd. ("WP X IVI"), a company established in the Cayman Islands, is the sole member of WP OCIM.(12) Warburg Pincus Private Equity X, L.P., a Delaware limited partnership, owns approximately 96.9% of WP X IVI.(13) Warburg Pincus X, L.P., ("WPXGP"), a Delaware limited partnership, is the general partner of Warburg Pincus Private Equity X, L.P.,

together with its affiliated partnership ("WPX").(14) Warburg Pincus LLC ("WP LLC"), a New York limited liability company, is the manager of WPX.(15) Warburg Pincus X GP L.P. ("WP X GP LP"), a Delaware limited partnership, is the general partner of WPXGP.(16) WPP GP LLC ("WPP GP"), a Delaware limited liability company, is the general partner of WP X GP LP.(17) Warburg Pincus Partners, L.P. ("WP Partners"), a Delaware limited partnership, is the managing member of WPP GP.(18) Warburg Pincus Partners GP LLC ("WP Partners GP"), a Delaware limited liability company, is the general partner of WP

Partners. (19) Warburg Pincus & Co. ("WP"), a New York general partnership, is the managing member of WP Partners GP. (20) Charles R. Kaye and Joseph P. Landy are each Managing General Partners of WP and Managing Members and Co-Chief Executive

Officers of WP LLC and deemed to control the Warburg Pincus entities. Charles R. Kaye and Joseph P. Landy disclaim beneficial ownership of all shares held by the Warburg Pincus entities.

FREE FLOAT

Under Rule 723 of the Listing Manual, a listed issuer must ensure that at least 10.00% of its listed securities are at all times held by the public.

Based on information available to the Manager as at 15 March 2017, 76.33% of the Units in Sabana REIT are held in the hands of public. Accordingly, Rule 723 of the Listing Manual has been complied with.

171


Notice of Annual General Meeting

SABANA SHARI’AH COMPLIANT INDUSTRIAL REAL ESTATE INVESTMENT TRUST(a real estate investment trust constituted on 29 October 2010 under the laws of the Republic of Singapore)

Managed by Sabana Real Estate Investment Management Pte. Ltd.(Company Registration No. 201005493K)

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the holders of units of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (“Sabana REIT” and the holders of units of Sabana REIT, “Unitholders”) will be held at Suntec Singapore Convention & Exhibition Centre, Hall 404, Level 4 at 1 Raffles Boulevard, Suntec City, Singapore 039593 on Friday, 28 April 2017 at 9.00 a.m., to transact the following business:

(A) AS ORDINARY BUSINESS

1. To receive and adopt the Report of the Trustee issued by HSBC Institutional Trust Services (Singapore) Limited, as trustee of Sabana REIT (the “Trustee”), the Statement by the Manager issued by Sabana Real Estate Investment Management Pte. Ltd., as manager of Sabana REIT (the “Manager”), the Audited Financial Statements of Sabana REIT for the financial year ended 31 December 2016 and the Auditors’ Report thereon.

(Ordinary Resolution 1)

2. To re-appoint KPMG LLP as Auditors of Sabana REIT and to hold office until the conclusion of the next Annual General Meeting of Sabana REIT, and to authorise the Manager to fix their remuneration.


(B) AS SPECIAL BUSINESS

To consider and, if thought fit, to pass the following Ordinary Resolution, with or without any modifications:

3. That authority be and is hereby given to the Manager, to

(a) (i) issue units in Sabana REIT (“Units”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Units to be issued, including but not limited to the creation and issue of (as well as adjustments to) securities, warrants, debentures or other instruments convertible into Units,

at any time and upon such terms and conditions and for such purposes and to such persons as the Manager may in its absolute discretion deem fit; and

172



(b) issue Units in pursuance of any Instrument made or granted by the Manager while this Resolution was in force (notwithstanding that the authority conferred by this Resolution may have ceased to be in force at the time such Units are issued),

provided that:

(1) the aggregate number of Units to be issued pursuant to this Resolution (including Units to be issued in pursuance of Instruments made or granted pursuant to this Resolution) shall not exceed fifty per cent. (50%) of the total number of issued Units (excluding treasury Units, if any) (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of Units to be issued other than on a pro rata basis to Unitholders (including Units to be issued in pursuance of Instruments made or granted pursuant to this Resolution) shall not exceed twenty per cent. (20%) of the total number of issued Units (excluding treasury Units, if any) (as calculated in accordance with sub-paragraph (2) below);

(2) subject to such manner of calculation as may be prescribed by Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the purpose of determining the aggregate number of Units that may be issued under sub-paragraph (1) above, the total number of issued Units (excluding treasury Units, if any) shall be based on the total number of issued Units (excluding treasury Units, if any) at the time this Resolution is passed, after adjusting for:

(a) any new Units arising from the conversion or exercise of any Instruments which are outstanding at the time this Resolution is passed; and

(b) any subsequent bonus issue, consolidation or subdivision of Units;

(3) in exercising the authority conferred by this Resolution, the Manager shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the trust deed constituting Sabana REIT dated 29 October 2010 (as amended by the First Supplemental Deed dated 2 December 2010, the First Amending and Restating Deed dated 24 February 2016 and the Second Amending and Restating Deed dated 24 March 2016) (collectively, the “Trust Deed”) for the time being in force (unless otherwise exempted or waived by the Monetary Authority of Singapore);

(4) unless revoked or varied by the Unitholders in a general meeting, the authority conferred by this Resolution shall continue in force until (i) the conclusion of the next Annual General Meeting of Sabana REIT or (ii) the date by which the next Annual General Meeting of Sabana REIT is required by the applicable law or regulations to be held, whichever is earlier;

173



(5) where the terms of the issue of the Instruments provide for adjustment to the number of Instruments or Units into which the Instruments may be converted in the event of rights, bonus or other capitalisation issues or any other events, the Manager is authorised to issue additional Instruments or Units pursuant to such adjustment notwithstanding that the authority conferred by this Resolution may have ceased to be in force at the time the Instruments or Units are issued; and

(6) the Manager, any director of the Manager (“Director”) and the Trustee, be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager, such Director or, as the case may be, the Trustee may consider expedient or necessary or in the interest of Sabana REIT to give effect to the authority conferred by this Resolution.


(Please see Explanatory Note)

By Order of the Board

Sabana Real Estate Investment Management Pte. Ltd.(Company Registration No: 201005493K)As Manager of Sabana REIT

Kevin XayarajChief Executive Officer and Executive Director

Singapore11 April 2017

Notes:1. A Unitholder who is not a relevant intermediary entitled to attend and vote at the Annual General

Meeting, is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a Unitholder.

2. Where a Unitholder appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her holding (expressed as a percentage of the whole) to be represented by each proxy.

174



3. A Unitholder who is a relevant intermediary entitled to attend the Annual General Meeting and vote is entitled to appoint more than one proxy to attend and vote instead of the Unitholder, but each proxy must be appointed to exercise the rights attached to a different Unit or Units held by such Unitholder. Where such Unitholder appoints more than one proxy, the appointments shall be invalid unless the Unitholder specifies the number of Units in relation to which each proxy has been appointed.

“Relevant intermediary” means:

(a) a banking corporation licensed under the Banking Act (Cap. 19) or a wholly-owned subsidiary of such a banking corporation, whose business includes the provision of nominee services and who holds Units in that capacity;

(b) a person holding a capital markets services licence to provide custodial services for securities under the Securities and Futures Act (Cap. 289) and who holds Units in that capacity; or

(c) the Central Provident Fund Board (“CPF Board”) established by the Central Provident Fund Act (Cap. 36), in respect of Units purchased under the subsidiary legislation made under that Act providing for the making of investments from the contributions and interest standing to the credit of members of the Central Provident Fund, if the CPF Board holds those Units in the capacity of an intermediary pursuant to or in accordance with that subsidiary legislation.

4. The proxy form must be deposited at the office of Sabana REIT’s Unit Registrar, Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623 not later than 9.00 a.m. on 25 April 2017, being 72 hours before the time fixed for the Annual General Meeting.

5. By submitting an instrument appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the Annual General Meeting and/or any adjournment thereof, a Unitholder (i) consents to the collection, use and disclosure of the Unitholder’s personal data by Sabana REIT, the Trustee or the Manager (or their respective agents) for the purpose of processing and administration by Sabana REIT, the Trustee or the Manager (or their respective agents) of proxies and representatives appointed for the Annual General Meeting (including any adjournment thereof) and the preparation and compilation of the attendance lists, minutes and other documents relating to the Annual General Meeting (including any adjournment thereof), and in order for Sabana REIT, the Trustee or the Manager (or their respective agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that where the Unitholders discloses the personal data of the Unitholder’s proxy(ies) and/or representative(s) to Sabana REIT, the Trustee or the Manager (or their respective agents), the Unitholder has obtained the prior consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by Sabana REIT, the Trustee or the Manager (or their respective agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) agrees that the Unitholder will indemnify Sabana REIT, the Trustee or the Manager (or their respective agents) in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the Unitholder’s breach of warranty.

175



Explanatory Note:

Ordinary Resolution 3, if passed, will empower the Manager from the date of this Annual General Meeting until (i) the conclusion of the next Annual General Meeting of Sabana REIT, (ii) the date by which the next Annual General Meeting of Sabana REIT is required by the applicable regulations to be held, or (iii) the date on which such authority is revoked or varied by the Unitholders in a general meeting, whichever is the earliest, to issue Units, to make or grant Instruments and to issue Units pursuant to such Instruments, up to a number not exceeding 50% of which up to 20% may be issued other than on a pro rata basis to Unitholders (in each case, excluding treasury Units, if any).

Ordinary Resolution 3 above, if passed, will empower the Manager from the date of this Annual General Meeting until the date of the next Annual General Meeting of Sabana REIT, to issue Units as either full or partial payment of fees which the Manager is entitled to receive for its own account pursuant to the Trust Deed.

For determining the aggregate number of Units that may be issued, the percentage of issued Units will be calculated based on the issued Units at the time Ordinary Resolution 3 above is passed, after adjusting for new Units arising from the conversion or exercise of any Instruments which are outstanding at the time this Resolution is passed and any subsequent bonus issue, consolidation or subdivision of Units.

Fund-raising by issuance of new Units may be required in instances of property acquisitions or debt repayments. In any event, if the approval of Unitholders is required under the Listing Manual of the SGX-ST and the Trust Deed or any applicable laws and regulations in such instances, the Manager will then obtain the approval of Unitholders accordingly.

Important Notice

The value of Units and the income derived from them, if any, may fall or rise. Units are not obligations of, deposits in, or guaranteed by, the Manager or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the principal amount invested.

Investors should note that they have no right to request the Manager to redeem or purchase their Units for so long as the Units are listed on the SGX-ST. It is intended that Unitholders may only deal in their Units through trading on the SGX-ST. The listing of the Units on the SGX-ST does not guarantee a liquid market for the Units.

The past performance of Sabana REIT is not necessarily indicative of the future performance of Sabana REIT.

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SABANA SHARI’AH COMPLIANT INDUSTRIAL REAL ESTATE INVESTMENT TRUST(a real estate investment trust constituted on 29 October 2010 under the laws of the Republic of Singapore)

Managed by Sabana Real Estate Investment Management Pte. Ltd.(Company Registration No. 201005493K)

PROXY FORMANNUAL GENERAL MEETING(Before completing this form, please read the notes behind)

IMPORTANT:1. This Proxy Form is not valid for use by CPF investors and shall be

ineffective for all intents and purposes if used, or purported to be used by them. CPF investors should contact their respective Agent Banks if they have any queries regarding their appointment as proxies.

2. A relevant intermediary may appoint more than one proxy to attend the Annual General Meeting and vote (please see note 3 for the definition of “relevant intermediary”).

3. By submitting an instrument appointing one proxy and/or representative(s), the Unitholder accepts and agrees to the personal data privacy terms set out in the Notice of Annual General Meeting dated 11 April 2017.

4. PLEASE READ THE NOTES TO THE PROXY FORM.

I/We, ___________________________________________(Name)_______________________(NRIC/Passport Number)

of _________________________________________________________________________________________ (Address) being a Unitholder / Unitholders of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (“Sabana REIT”), hereby appoint:

Name Address NRIC / Passport No.Proportion of Unitholdings

No. of Units %

and / or (delete as appropriate)

Name Address NRIC / Passport No.Proportion of Unitholdings

No. of Units %

or failing him/her/them, the Chairman of the Annual General Meeting (“AGM”), as my/our proxy/proxies to attend and vote for me/us on my/our behalf at the AGM of Sabana REIT to be held at Suntec Singapore Convention & Exhibition Centre, Hall 404, Level 4 at 1 Raffles Boulevard, Suntec City, Singapore 039593 on Friday, 28 April 2017 at 9.00 a.m. and at any adjournment thereof.

I/We direct my/our proxy/proxies to vote for or against the resolutions to be proposed at the AGM as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies may vote or abstain from voting at his/her/their discretion, as his/they may on any other matter arising at the AGM.

No. Ordinary ResolutionsNo. of votes

For*No. of votes

Against*ORDINARY BUSINESS

1 To receive and adopt the Report of the Trustee, the Statement by the Manager, the Audited Financial Statements of Sabana REIT for the financial year ended 31 December 2016 and the Auditors' Report thereon.

2 To re-appoint KPMG LLP as Auditors of Sabana REIT and to authorise the Manager to fix their remuneration.

SPECIAL BUSINESS3 To authorise the Manager to issue Units and to make or grant convertible

instruments.

* Voting will be conducted by poll. If you wish to exercise all your votes “For” or “Against”, please tick (P) within the box provided. Alternatively, please indicate the number of votes as appropriate.

Dated this _________ day of ___________ 2017

Signature(s) of Unitholder(s) / Common Seal of Corporate Unitholder

TOTAL NUMBER OF UNITS HELD

IMPORTANT: PLEASE READ NOTES TO PROXY FORM ON THE REVERSE PAGE

IMPORTANT: PLEASE READ THE NOTES TO PROXY FORM BELOW

Notes to Proxy Form1. A unitholder of Sabana REIT (“Unitholder”) who is not a relevant intermediary entitled to attend and vote at the Annual

General Meeting (“AGM”), is entitled to appoint one or two proxies to attend and vote in his/her stead.

2. Where a Unitholder appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her holding (expressed as a percentage of the whole) to be represented by each proxy.

3. A Unitholder who is a relevant intermediary entitled to attend the AGM and vote is entitled to appoint more than one proxy to attend and vote instead of the Unitholder, but each proxy must be appointed to exercise the rights attached to a different Unit or Units held by such Unitholder. Where such Unitholder appoints more than one proxy, the appointments shall be invalid unless the Unitholder specifies the number of Units in relation to which each proxy has been appointed.

“Relevant intermediary” means:

(a) a banking corporation licensed under the Banking Act (Cap. 19) or a wholly-owned subsidiary of such a banking corporation, whose business includes the provision of nominee services and who holds Units in that capacity;

(b) a person holding a capital markets services licence to provide custodial services for securities under the Securities and Futures Act (Cap. 289) and who holds Units in that capacity; or

(c) the Central Provident Fund Board (“CPF Board”) established by the Central Provident Fund Act (Cap. 36), in respect of Units purchased under the subsidiary legislation made under that Act providing for the making of investments from the contributions and interest standing to the credit of members of the Central Provident Fund, if the CPF Board holds those Units in the capacity of an intermediary pursuant to or in accordance with that subsidiary legislation.

4. A proxy need not be a Unitholder.

5. A Unitholder should insert the total number of Units held. If the Unitholder has Units entered against his/her name in the Depository Register maintained by The Central Depository (Pte) Limited (“CDP”) (as defined in Section 130A of the Companies Act (Cap. 50)), he/she should insert that number of Units. If the Unitholder has Units registered in his/her name in the Register of Unitholders of Sabana REIT, he/she should insert that number of Units. If the Unitholder has Units entered against his/her name in the said Depository Register and registered in his/her name in the Register of Unitholders, he/she should insert the aggregate number of Units. If no number is inserted, this Proxy Form (as defined in note 6 below) will be deemed to relate to all the Units held by the Unitholder.

6. The instrument appointing a proxy or proxies (the “Proxy Form”) must be deposited at the office of Sabana REIT’s Unit Registrar, Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623 not later than 9.00 a.m. on 25 April 2017, being 72 hours before the time set for the AGM.

7. Completion and return of the Proxy Form shall not preclude a Unitholder from attending and voting at the AGM.

8. The Proxy Form must be executed under the hand of the appointor or of his/her attorney duly authorised in writing. Where the Proxy Form is executed by a corporation, it must be executed under its common seal or under the hand of its attorney or a duly authorised officer.

9. Where the Proxy Form is signed on behalf of the appointor by an attorney or a duly authorised officer, the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority must (failing previous registration with the Manager) be lodged with the Proxy Form, failing which the Proxy Form may be treated as invalid.

10. The Manager shall be entitled to reject a Proxy Form which is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the Proxy Form. In addition, in the case of Units entered in the Depository Register, the Manager may reject a Proxy Form if the Unitholder, being the appointor, is not shown to have Units entered against his/her name in the Depository Register as at 72 hours before the time appointed for holding the AGM, as certified by CDP to the Manager.

11. All Unitholders will be bound by the outcome of the AGM regardless of whether they have attended or voted at the AGM.

12. On a poll, every Unitholder who is present in person or by proxy shall have one vote for every Unit of which he/she is the Unitholder. There shall be no division of votes between a Unitholder who is present in person and voting at the AGM and his/her proxy(ies). A person entitled to more than one vote need not use all his/her votes or cast them the same way.

SABANA REIT

REGISTERED ADDRESSHSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay#13-02 HSBC BuildingSingapore 049320

TRUSTEEHSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay#03-01 HSBC BuildingSingapore 049320

EXTERNAL AUDITORSKPMG LLPPublic Accountants and Chartered Accountants16 Raffles Quay#22-00 Hong Leong BuildingSingapore 048581Phone: (65) 6213 3388Fax: (65) 6225 4142

Partner-in-charge: Karen LeeAppointed since financial year ended 31 December 2016

INTERNAL AUDITORS PricewaterhouseCoopers LLP8 Cross Street#17-00 PWC BuildingSingapore 048424Phone: (65) 6236 3388Fax: (65) 6236 3300

After October 2016:Ernst & Young Advisory Pte. Ltd.One Raffles QuayNorth Tower Level 18Singapore 048583Phone: (65) 6535 7777Fax: (65) 6532 7662

LEGAL ADVISERAllen & Gledhill LLPOne Marina Boulevard#28-00 Singapore 018989Phone: (65) 6890 7188Fax: (65) 6327 3800

UNIT REGISTRARBoardroom Corporate & Advisory Services Pte. Ltd.50 Raffles Place#32-01 Singapore Land TowerSingapore 048623Phone: (65) 6536 5355Fax: (65) 6536 1360

BANKERSThe Hongkong and Shanghai Banking Corporation Limited

HSBC Amanah Malaysia Berhad

Malayan Banking Berhad (Singapore Branch)

United Overseas Bank Limited

CIMB Bank Berhad (Singapore Branch)

STOCK QUOTESSTI – M1GUBloomberg – SSREIT SP Reuters – SABA.SIPOEMS – SBNR.SG

WEBSITEwww.sabana-reit.com

THE MANAGER

Sabana Real Estate Investment Management Pte. Ltd.

Company registration number: 201005493K151 Lorong Chuan#02-03 New Tech ParkSingapore 556741Phone: (65) 6580 7750Fax: (65) 6280 4700

BOARD OF DIRECTORSMr Steven Lim Kok HoongChairman and Independent Director

Mr Yong Kok HoonIndependent Director

Ms Ng Shin EinNon-Executive Director

Mr Henry Chua Tiong HockNon-Executive Director

Mr Kevin XayarajCEO and Executive Director

AUDIT COMMITTEEMr Yong Kok Hoon (Chairman)Mr Steven Lim Kok HoongMs Ng Shin Ein

NOMINATING AND REMUNERATION COMMITTEEMr Yong Kok Hoon (Chairman)Mr Steven Lim Kok HoongMr Henry Chua Tiong Hock

COMPANY SECRETARY OF THE MANAGERMr Cho Form Po

Corporate Information

Sabana Real Estate Investment Management Pte. Ltd.(As Manager of Sabana REIT)

151 Lorong Chuan#02-03 New Tech Park Singapore 556741Phone: (65) 6580 7750Fax: (65) 6280 4700www.sabana-reit.com

Annual Report 2016 - listed companysabana.listedcompany.com/misc/ar2016/ar2016.pdf ·...

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Transcript of Annual Report 2016 - listed companysabana.listedcompany.com/misc/ar2016/ar2016.pdf ·...